UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2007 or

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________to___________________

Commission file number 0-18314

	MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

(Exact name of registrant as specified in its Limited Partnership Agreement)

		DELAWARE		        				13-3541588
(State or other jurisdiction of			   	   (I.R.S. Employer
incorporation or organization)			 	         Identification No.)

Demeter Management Corporation
522 Fifth Avenue, 13th Floor
New York, NY                            			 	  10036
(Address of principal executive offices)		  		(Zip Code)

Registrant?s telephone number, including area code 	     (212) 296-1999

Securities registered pursuant to Section 12(b) of the Act:
									  Name of each exchange
   Title of each class  						   on which registered

		None								    None

Securities registered pursuant to Section 12(g) of the Act:

	Units of Limited Partnership Interest

	(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.  Yes          No  X

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.  Yes          No  X

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes   X      No  _____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant?s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of ?accelerated
filer and large accelerated filer? in Rule 12b-2 of the Exchange Act.  (Check
one):

Large accelerated filer___  Accelerated filer____  Non-accelerated filer   X

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).  Yes       No  X

State the aggregate market value of the Units of Limited Partnership Interest
held by non-affiliates of the registrant.  The aggregate market value shall be
computed by reference to the price at which Units were sold as of the last
business day of the registrant?s most recently completed second fiscal quarter:
$12,478,926 at June 30, 2007.

	DOCUMENTS INCORPORATED BY REFERENCE
	(See Page 1)


<page> <table> MORGAN STANLEY PRINCIPAL PLUS FUND L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2007
<caption>                        Page No.

							<c>
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . 	. . . . . 1

Part I .

	Item 1. 	Business . . . . . . . . . . . . . . . . . . . . . . . . 2-6

	Item 1A.	Risk Factors . . . . . . . . . . . . . . . . . . . . . . 6-7

	Item 1B.	Unresolved Staff Comments. . . . . . . . . . . . . . . . . 7

	Item 2. 	Properties . . . . . . . . . . . . . . . . . . . . . . . 7-8

	Item 3. 	Legal Proceedings . . . . . . . . . . . . . . . . . . . . .8

	Item 4. 	Submission of Matters to a Vote of Security Holders . . .  8

Part II.

	Item 5. 	Market for Registrant's Common Equity, Related
			Stockholder Matters and Issuer Purchases of
			Equity Securities . . . . . . . . . . . . . . . . . . . .  9

	Item 6. 	Selected Financial Data . . . . . . . . . . . . . . . . . 10

	Item 7. 	Management's Discussion and Analysis of Financial
				Condition and Results of Operations . . . . . . . . . .11-31

	Item 7A.	Quantitative and Qualitative Disclosures About
				Market Risk . . . . . . . . . . . . . . . . . . . . .  31-46

	Item 8. 	Financial Statements and Supplementary Data . . . . . .46-47

	Item 9.		Changes in and Disagreements with Accountants on
			Accounting and Financial Disclosure . . . . . . . . . . . 47

	Item 9A.		Controls and Procedures . . . . . . . . . . . . . . . .47-50

	Item 9A(T).Controls and Procedures. . . . . . . . . . . . . . . . .50

	Item 9B.	Other Information . . . . . . . . . . . . . . . . . . . . 50

Part III.

	Item 10.		Directors, Executive Officers and Corporate
			Governance . . . . . . . . . . . . . . . . . . . . . . 51-58

	Item 11.	Executive Compensation . . . . . . . . . . . . . . . . 58-59

	Item 12.		Security Ownership of Certain Beneficial Owners
				and Management and Related Stockholder Matters.. . . . . .59

	Item 13.	Certain Relationships and Related Transactions,
			and Director Independence . . . . . . . . . .  . . . .  . 59
	Item 14.		Principal Accountant Fees and Services. . . . . . . . .60-61
Part IV.

	Item 15.		Exhibit and Financial Statement Schedules. . . . . . . 62-63

</table>


<page>









	DOCUMENTS INCORPORATED BY REFERENCE


Portions of the following documents are incorporated by reference
as follows:


	        Documents Incorporated	         Part of Form 10-K

	Partnership's Prospectus dated
	November 8, 1995    	      I

	Annual Report to Morgan Stanley
	Principal Plus Fund L.P.
	Limited Partners for the year
	ended December 31, 2007                II, III, and IV
























- 1 -
<page> PART I
Item 1.  BUSINESS


(a) General Development of Business.  Morgan Stanley Principal
Plus Fund L.P. (the "Partnership") is a Delaware limited
partnership organized in 1989 to engage primarily in the
speculative trading of futures contracts, options on futures
contracts, and forward contracts on physical commodities and other
commodity interests (collectively, ?Futures Interests?). The
Partnership commenced trading operations on February 14, 1990.

The Partnership?s general partner is Demeter Management
Corporation (?Demeter?).  The commodity brokers are Morgan Stanley
& Co. Incorporated (?MS&Co.?) and Morgan Stanley & Co.
International plc (?MSIP?).  MS&Co. also acts as the counterparty
on all trading of foreign currency forward contracts.  MSIP serves
as the commodity broker for trades on the London Metal Exchange.
The commodity brokers prior to April 1, 2007, were Morgan Stanley
DW Inc. (?Morgan Stanley DW?), MS&Co., and MSIP.  Demeter, MS&Co.,
and MSIP are wholly-owned subsidiaries of Morgan Stanley. The
trading advisor to the Partnership is SSARIS Advisors, LLC (the
?Trading Advisor?).  Morgan Stanley Principal Plus Fund Management
L.P. was established solely to trade in Futures Interests on
behalf of the Partnership.

- 2 -
<page> Effective April 1, 2007, Morgan Stanley DW merged into
MS&Co.  Upon completion of the merger, the surviving entity,
MS&Co., became the Partnership?s principal U.S. commodity broker-
dealer.

Effective April 13, 2007, Morgan Stanley & Co. International
Limited changed its name to Morgan Stanley & Co. International
plc.

From February 1, 1996, through August 31, 2003 (the ?Guarantee
Period?), the Partnership had approximately 80% of its assets
invested in zero-coupon United States Treasury Securities (the
?Yield Pool?) and its remaining assets were invested in Futures
Interests.

The investment in the Yield Pool was made in order to ensure a
guaranteed net asset value per limited partnership interest
(?Unit(s)?) of $1,961.00 as of the end of the Guarantee Period,
which occurred on August 31, 2003.  At the end of the Guarantee
Period the net asset value per Unit was $2,058.58, greater than
the guaranteed net asset value of at least $1,961.00 per Unit.
The zero-coupon U.S. Treasury Securities matured and the Yield
Pool was liquidated on August 31, 2003.  The proceeds from its
liquidation were invested in and will continue to be used in the
                             - 3 -
<page> trading of Futures Interests without any guarantee with
respect to the net asset value per Unit at any futures date.

The Partnership began the year at a net asset value per Unit of
$1,909.85 and returned (2.0)% to $1,872.42 on December 31, 2007.
For a more detailed description of the Partnership's business, see
subparagraph (c).

(b) Financial Information about Segments.  For financial infor-
mation reporting purposes, the Partnership is deemed to engage in
one industry segment, the speculative trading of futures,
forwards, and options.  The relevant financial information is
presented in Items 6 and 8.

(c) Narrative Description of Business.  The Partnership is in the
business of speculative trading of futures, forwards, and options
pursuant to trading instructions provided by the Trading Advisor.
For a detailed description of the different facets of the
Partnership's business, see those portions of the Partnership's
prospectus, dated November 8, 1995 (the ?Prospectus?), incor-
porated by reference in this Form 10-K, set forth below.

	Facets of Business
	1.	Summary	1.	"Summary of the Prospectus"
		(Pages 2-14 of the
		 Prospectus).

- 4 -
<page>
	2.	Commodity Markets	2.	"The Futures, Options, and
				 Forward Markets" (Pages
				 51-56 of the Prospectus).

	3.	Partnership's Commodity	3.	?Trading Policies? (Page
		Trading Arrangements and		 62 of the Prospectus). ?The
  		Policies		 Trading Advisor? (Pages 58-
				 62 of the Prospectus).
				?The Yield Pool? (Page 63
				 of the Prospectus).  ?The
				 Trading Company? (Pages
				 63-64 of the Prospectus).

	4.	Management of the Part-	4.	"The Management Agree-
		nership		 ment?(Pages 66-67 of the
				 Prospectus).  ?The General
				 Partner? (Pages 48-50 of
				 the Prospectus) and
				"The Commodity Broker?
				(Pages 64-65 of the
				 Prospectus).  ?The
 Partnership Agreement?
(Pages 70-73 of the
 Prospectus).

	5.	Taxation of the Partner-	5. 	?Material Federal Income
  	ship?s Limited Partners		 Tax  Aspects? and "State
				 and Local Income Tax
                        		 Aspects" (Pages 77-86 of
				 the Prospectus).


(d) Financial Information about Geographic Areas.  The Partnership
has not engaged in any operations in foreign countries; however,
the Partnership (through the commodity brokers) enters into
forward contract transactions where foreign banks are the
contracting party and trades in futures, forwards, and options on
foreign exchanges.


- 5 -
<page>
(e) Available Information.  The Partnership files an annual
report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to these reports with the
Securities and Exchange Commission (?SEC?).  You may read and
copy any document filed by the Partnership at the SEC?s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for information on the
Public Reference Room.  The Partnership does not maintain an
internet website; however, the Partnership?s SEC filings are
available to the public from the EDGAR database on the SEC?s
website at ?http://www.sec.gov?.  The Partnership?s CIK number is
0000854915.

Item 1A.  RISK FACTORS
The following risk factors contain forward-looking statements
within the meaning of the safe harbor from civil liability
provided for such statements by the Private Securities Litigation
Reform Act of 1995 (set forth in Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in ?Quantifying the Partnership?s
Trading Value at Risk? in Item 7A ?Quantitative and Qualitative
Disclosures About Market Risk? are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements
                                - 6 -
<page> of historical fact.  The qualitative disclosures, except
for (A) those disclosures that are statements of historical fact
and (B) the descriptions of how the Partnership manages its
primary market risk exposure, in the ?Qualitative Disclosure
Regarding Primary Trading Risk Exposures? in Item 7A ?Quantitative
and Qualitative Disclosures About Market Risk? are deemed to be
forward looking statements for purposes of the safe harbor.

The Partnership is in the business of speculative trading of
futures, forwards, and options.  For a detailed description of the
risks that may affect the business of the Partnership, see the
discussion of risk factors as set forth in Item 7 ?Management?s
Discussion and Analysis of Financial Condition and Results of
Operations? and Item 7A ?Quantitative and Qualitative Disclosures
About Market Risk?.

Item 1B.  UNRESOLVED STAFF COMMENTS
Not applicable.

Item 2.  PROPERTIES
The Partnership?s executive and administrative offices are located
within the offices of MS&Co. The MS&Co. offices utilized by the
Partnership are located at 522 Fifth Avenue, 13th Floor, New York,
NY  10036.
- 7 -
<page> Demeter changed its address in June 2007 from 330 Madison
Avenue, 8th Floor, New York, NY 10017 to 522 Fifth Avenue, 13th
Floor, New York, NY 10036.

Item 3.  LEGAL PROCEEDINGS
None.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.















- 8 -


<page>	PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
         STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
	    SECURITIES



(a) Market Information.  There is no established public trading
market for Units of the Partnership.

(b) Holders.  The number of holders of Units at December 31,
2007, was approximately 820.

(c) Distributions.  No distributions have been made by the
Partnership since it commenced operations on February 14, 1990.
Demeter has sole discretion to decide what distributions, if any,
shall be made to investors in the Partnership.  Demeter currently
does not intend to make any distributions of the Partnership?s
profits.








- 9 -


<page> <table>
Item 6.  SELECTED FINANCIAL DATA (in dollars)

<caption>






	      	                 For the Years Ended December 31,
                 2007        2006         2005         2004        2003  _


					<c>			<c>		<c>		<c>		<c>
Total Trading Results
including interest
income and change in
value of Yield Pool	 	   595,589	  1,055,932 	    315,385      318,224   1,166,605


Net Income (Loss)	 	   	  (238,397)	    117,359	   (808,754)  (1,060,662)   (606,538)


Net Income (Loss)
for Tax and Net Asset
Valuation 			   	  (238,397)	    117,359 	   (808,754)	  (1,060,662)    307,485


Net Income (Loss)
Per Unit for Tax and
Net Asset Valuation
(Limited & General
Partners) 			     	    (37.43)		14.46 	     (74.61)	     (83.17)	      21.71


Total Assets 			11,668,654   14,304,353	 17,393,538   23,076,078	 27,321,957


Total Limited
Partners' Capital			11,173,321 	 13,798,864	 16,716,099   21,965,072	 26,207,748


Net Asset Value Per
Unit 				 	  1,872.42	   1,909.85	   1,895.39     1,970.00	   2,053.17








</table>


	- 10 -


<page> Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	   CONDITION AND RESULTS OF OPERATIONS


Liquidity.  The Partnership deposits its assets with Morgan
Stanley DW (through March 31, 2007), MS&Co., and MSIP as commodity
brokers in separate futures, forwards, and options trading
accounts established for the Trading Advisor.  Such assets are
used as margin to engage in trading and may be used as margin
solely for the Partnership?s trading.  The assets are held in
either non-interest bearing bank accounts or in securities and
instruments permitted by the Commodity Futures Trading Commission
for investment of customer segregated or secured funds. Since the
Partnership?s sole purpose is to trade in futures, forwards, and
options, it is expected that the Partnership will continue to own
such liquid assets for margin purposes.

The Partnership?s investment in futures, forwards, and options
may, from time to time, be illiquid.  Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as ?daily price fluctuations limits? or ?daily
limits?.  Trades may not be executed at prices beyond the daily
limit.  If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be taken

- 11 -
<page> nor liquidated unless traders are willing to effect trades
at or within the limit.  Futures prices have occasionally moved
the daily limit for several consecutive days with little or no
trading.  These market conditions could prevent the Partnership
from promptly liquidating its futures or options contracts and
result in restrictions on redemptions.

There is no limitation on daily price moves in trading forward
contracts on foreign currencies.  The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses.  Either of these market conditions could
result in restrictions on redemptions.  For the periods covered by
this report, illiquidity has not materially affected the
Partnership?s assets.

There are no known material trends, demands, commitments, events,
or uncertainties at the present time that are reasonably likely to
result in the Partnership?s liquidity increasing or decreasing in
any material way.


- 12 -
<page> Capital Resources.  The Partnership does not have, nor does
it expect to have, any capital assets.  Redemptions of Units in
the future will affect the amount of funds available for
investments in futures, forwards, and options in subsequent
periods.  It is not possible to estimate the amount, and therefore
the impact, of future outflows of Units.

There are no known material trends, favorable or unfavorable, that
would affect, nor any expected material changes to, the
Partnership?s capital resource arrangements at the present time.

Results of Operations
General.  The Partnership's results depend on the Trading Advisor
and the ability of the Trading Advisor's trading program to take
advantage of price movements in the futures, forwards, and options
markets.  The following presents a summary of the Partnership's
operations for each of the three years in the period ended
December 31, 2007, and a general discussion of its trading
activities during each period.  It is important to note, however,
that the Trading Advisor trades in various markets at different
times and that prior activity in a particular market does not mean
that such market will be actively traded by the Trading Advisor or
will be profitable in the future. Consequently, the results of
operations of the Partnership are difficult to discuss other than
                               - 13 -
<page> in the context of the Trading Advisor's trading activities
on behalf of the Partnership during the period in question.  Past
performance is no guarantee of future results.

The Partnership?s results of operations set forth in the Financial
Statements are prepared in accordance with accounting principles
generally accepted in the United States of America, which require
the use of certain accounting policies that affect the amounts
reported in these Financial Statements, including the following:
The contracts the Partnership trades are accounted for on a trade-
date basis and marked to market on a daily basis. The difference
between their cost and market value is recorded on the
Consolidated Statements of Operations as ?Net change in unrealized
trading profit (loss)? for open (unrealized) contracts, and
recorded as ?Realized trading profit (loss)? when open positions
are closed out.  The sum of these amounts, along with the
?Proceeds from Litigation Settlement?, constitutes the
Partnership?s trading results. The market value of a futures
contract is the settlement price on the exchange on which that
futures contract is traded on a particular day.  The value of a
foreign currency forward contract is based on the spot rate as of
the close of business.  Prior to August 31, 2003, the difference
between the cost of the zero-coupon U.S. Treasury Securities and
its market value was recorded as ?Change in value of Yield Pool?.
                               - 14 -


<page> Interest income, as well as management fees, incentive
fees, brokerage fees, administrative expenses, and transaction
fees and costs of the Partnership are recorded on an accrual
basis.

Demeter believes that, based on the nature of the operations of
the Partnership, no assumptions relating to the application of
critical accounting policies other than those presently used could
reasonably affect reported amounts.

The Partnership recorded total trading results including interest
income totaling $595,589 and expenses totaling $836,945, and
minority interest of $(2,959), resulting in a net loss of $238,397
for the year ended December 31, 2007.  The Partnership?s net asset
value per Unit decreased from $1,909.85 at December 31, 2006, to
$1,872.42 at December 31, 2007.  Total redemptions for the year
were $2,391,189 and the Partnership?s ending capital was
$11,375,599 at December 31, 2007, a decrease of $2,629,586 from
ending capital at December 31, 2006, of $14,005,185.

The most significant trading losses of approximately 5.7% were
incurred within the global stock index sector during February and
early March from long positions in U.S., European, and Pacific Rim
stock index futures as prices reversed sharply lower after a
massive sell-off in the global equity markets that began on
February 27, 2007, following comments from former U.S. Federal
                              - 15 ?


<page> Reserve Chairman Alan Greenspan that the U.S. economy could
be  due for a recession.  In addition, worries that tighter credit
conditions in China and Japan might dampen global growth first
sent Chinese stock markets plunging before the sell-off spread
to other equity markets.  During July, August, November, and
December, long positions in U.S. and European equity index futures
resulted in further losses as prices fell sharply on concerns that
a widening credit crunch, sparked by U.S. sub-prime mortgage
losses, would erode global economic growth and corporate earnings.
A portion of these losses was offset by gains of approximately
3.2% experienced in the global interest rate sector
during January, May, and June from short positions in U.S.,
German, and Japanese fixed-income futures as prices trended lower
as consistently strong economic data and rising global equity
prices resulted in reduced demand for the ?safe haven? of fixed-
income investments.  In addition, prices moved higher on investor
sentiment that the respective central banks would need to raise
interest rates in order to curb inflation.  During August,
September, and November, newly established long positions in U.S.,
German, and Japanese fixed-income futures resulted in gains as
prices increased in a worldwide ?flight-to-quality? after
volatility in global equity markets, spurred by losses in the U.S.
sub-prime mortgage sector, caused investors to seek the ?safety?
of government bonds.  Additional gains of approximately 0.6% were
recorded in the energy sector during March, April, July, October,
and December from long futures positions in crude oil and its
related products as prices trended higher due to persistent
                               - 16 ?


<page> concerns that instability in Iraq and tension over Iran's
nuclear program would negatively affect global supply.  In
addition, energy prices increased amid continued weakness in the
U.S. dollar as U.S. dollar-denominated assets became more
attractive to investors. Gains of approximately 0.6% were also
achieved in the currency sector in April, September, and October
from long positions in the euro and British pound versus the U.S.
dollar, as well as outright short positions in the U.S. Dollar
Index, as the value of the U.S. dollar weakened against its major
rivals leading up to and after the U.S. Federal Reserve?s
decisions to cut interest rates in order to spur economic growth
after the collapse of the sub-prime mortgage market. Conversely,
strong economic data out of the European Union and the United
Kingdom added to growing investor sentiment that the respective
central banks of these countries would raise interest rates in
order to combat inflation. Smaller gains of approximately 0.5%
were experienced in the metals markets during February, March, and
April from long positions in nickel and copper futures as prices
moved higher on speculation that low stockpiles would create a
supply shortage in the future and after the International Monetary
Fund's strong global growth forecasts bolstered sentiment that
demand for base metals would increase during the year.  Further
gains were recorded from newly established short positions in
nickel futures as prices moved lower during June and November on
news that China would cut stainless steel output.  Elsewhere in
the metals complex, short positions in silver futures resulted in
gains primarily during March and June as prices fell amid
speculative selling. Finally,
                                - 17 ?


<page> gains of approximately 0.5% were recorded in the
agricultural complex during February from long futures positions
in the soybean complex as prices rose on speculative buying, news
of persistent global demand, and worries that drought conditions
in the western U.S. would cause a shortage in the spring harvest
of 2007. Prices increased further during September and December
amid sentiment that the rising cost of oil might boost demand for
alternative biofuels and on concerns of diminishing supplies in
Brazil and Argentina, two of the world?s largest exporters.

The Partnership recorded total trading results including interest
income totaling $1,055,932 and expenses totaling $938,074, and
minority interest of $499, resulting in net income of $117,359 for
the year ended December 31, 2006.  The Partnership?s net asset
value per Unit increased from $1,895.39 at December 31, 2005, to
$1,909.85 at December 31, 2006.  Total redemptions for the year
were $3,033,032 and the Partnership?s ending capital was
$14,005,185 at December 31, 2006, a decrease of $2,915,673 from
ending capital at December 31, 2005, of $16,920,858.

The most significant trading gains of approximately 3.6% were
recorded in the global stock index sector during January and March
from long positions in U.S. and European equity index futures as
prices trended higher on strong corporate earnings and solid
economic data.  During August and September, additional gains were
experienced from long positions in U.S. and European equity index
                               - 18 -
<page> futures as prices advanced after a report by the U.S.
Conference Board reporting a stronger-than-expected rebound in
consumer confidence, as well as data showing increased merger and
acquisition activity and solid corporate earnings in Europe.
During October, gains continued from long positions in U.S. and
European stock index futures as prices moved higher amid declining
energy prices and stronger-than-expected third quarter earnings.
In addition, U.S. equity index futures prices rose after the U.S.
Federal Reserve?s decision to hold interest rates steady.
Finally, gains were experienced during December from long
positions in U.S. and European equity index futures as prices
continued to move higher amid optimism about the future of the
global economy.  Further gains of approximately 0.9% were
experienced within the metals markets, primarily during January
and March, from long futures positions in copper, nickel, and zinc
as prices strengthened amid weak supplies, forecasts for continued
buying by China, and acceleration in global demand.  During
October, long positions in zinc futures resulted in further gains
as prices rose amid labor protests in producer countries and news
that inventories, tracked by the London Metal Exchange, had
declined more-than-expected.  Additional gains were recorded in
December from short positions in copper futures as prices dropped
after industrial output unexpectedly fell in the Euro-Zone
countries, signaling reduced demand for the metal.  Smaller gains
of approximately 0.1% were recorded in the currency markets,
                                - 19 ?
<page> primarily from short positions in the South African rand
against the U.S. dollar as the rand trended lower during the
second quarter amid falling commodities prices, news that South
Africa?s Current-Account deficit had widened to a 24-year high,
and  expectations that the country?s Gross Domestic Product growth
would be weaker-than-expected.  During September, short positions
in the Norwegian krone versus the euro resulted in additional
gains as the value of the Norwegian krone moved lower on investor
concern that a prolonged decline in oil prices might negatively
affect the Norwegian economy.  In addition, gains were experienced
during the fourth quarter from short positions in the Australian
dollar versus the New Zealand dollar as the value of the New
Zealand dollar climbed higher as investors flocked to the higher
yields available on the nation's government bonds.  A portion of
the Partnership?s overall gains for the year was offset by trading
losses of approximately 1.6% in the global interest rate sector
from short and long positions in European and U.S. fixed-income
futures as prices moved without consistent direction amid
uncertainty regarding the future of global interest rate policy.
Additional losses were incurred from short positions in European
interest rate futures as prices reversed higher during the second
quarter after weakness in the equity markets created strong demand
for the ?safe haven? of fixed-income investments.  European
interest rate futures prices were also pushed higher after the May
?ZEW? Institute survey showed investor confidence in Germany had
                                - 20 ?
<page> fallen for a fourth straight month.  Losses were extended
in October and December from long positions in U.S. and European
fixed-income futures as prices moved lower amid overall strength
in the equity markets and speculation of further interest rate
hikes by the U.S. Federal Reserve and European Central Bank.
Further losses of approximately 0.4% were recorded in the energy
markets during March from short positions in gas oil futures as
prices moved higher on fears of supply disruptions fueled by news
of geopolitical tensions in Nigeria.  In May, newly established
long positions in gas oil futures experienced additional losses as
prices fell after supply data from the U.S. Department of Energy
showed crude oil inventory levels were at an eight-year high.  Gas
oil prices continued to fall into June on news of the death of
Iraqi insurgent leader Abu Musab al-Zarqawi and positive steps
taken regarding the nuclear standoff between the U.S. and Iran,
resulting in additional losses from long positions.  During
October and November, short positions in natural gas futures
incurred losses as prices reversed higher on speculation of
increased demand after weather forecasts called for colder weather
in the U.S. Northeast.  During December, losses were recorded from
long positions in gas oil futures as prices weakened due to
uncertainty regarding OPEC?s plan to cut production, a lower
demand forecast, and mild winter temperatures across the U.S.
Northeast.  Smaller losses of approximately 0.3% were incurred
during July in the agricultural markets from long positions in
                                - 21 ?
<page> orange juice futures as prices moved lower after the U.S.
Department of Agriculture reported an increase in orange juice
production.  Additional losses were incurred from newly
established short positions in orange juice futures as prices
reversed higher towards the end of the month on concerns regarding
poor harvest due to hot weather and labor shortages.  Finally,
losses were incurred from both short and long positions in corn
and lean hog futures as prices moved without consistent direction
throughout a majority of the year due to conflicting news
regarding supply and demand.

The Partnership recorded total trading results including interest
income totaling $315,385 and expenses totaling $1,134,384, and
minority interest of $10,245, resulting in a net loss of $808,754
for the year ended December 31, 2005.  The Partnership?s net asset
value per Unit decreased from $1,970.00 at December 31, 2004, to
$1,895.39 at December 31, 2005.  Total redemptions for the year
were $4,538,899 and the Partnership?s ending capital was
$16,920,858 at December 31, 2005, a decrease of $5,347,653 from
ending capital at December 31, 2004, of $22,268,511.

The most significant trading losses of approximately 1.6% were
recorded in the currency markets primarily during the first and
third quarters.  During the first quarter, losses stemmed from
long positions in the Singapore dollar versus the U.S. dollar as
                              - 22 ?
<page> the U.S. dollar advanced due to expectations that the
Chinese government would announce postponement of Chinese yuan
re-valuation.  Additional losses resulted during January from
short U.S. dollar positions versus the South African rand and
euro after the U.S. dollar?s value reversed sharply higher amid
conflicting economic data, improvements in U.S. trade deficit
data, and speculation for higher U.S. interest rates.  During
February, short positions in the Singapore dollar and euro versus
the U.S. dollar experienced losses as the U.S. dollar?s value
declined amid news of disappointing U.S. economic data and
proposed U.S. dollar reductions in foreign central bank currency
reserves.  Additional losses resulted during March from long
positions in the Singapore dollar and euro versus the U.S.
dollar, as well as from outright short positions in the U.S.
dollar index, after the value of the U.S. dollar reversed sharply
higher supported by market expectations for, and the eventual
increase in the U.S. federal funds rate by the U.S. Federal
Reserve.  The value of the U.S. dollar strengthened further
following the release of a larger-than-expected increase in
February consumer prices.  During the latter half of August and
September, losses were incurred from long positions in the New
Zealand dollar as the value of the New Zealand dollar declined on
fears for an economic slow down in New Zealand.  Smaller losses
were incurred from long positions in the euro versus the U.S.
dollar in September as the value of the euro was pulled down
                                - 23 ?
<page> after the release of lower 2005 and 2006 growth estimates
for the European economy and news that Germany?s incumbent
Chancellor, Gerhard Schroeder, refused to concede defeat to the
opposition leader, Angela Merkel, in the days after the election.
During July and August, losses were recorded from positions in
the Singapore dollar relative to the U.S. dollar as the value of
the Singapore dollar moved in a trendless pattern.  Finally in
December, losses were incurred from short U.S. dollar positions
against the New Zealand dollar after the New Zealand dollar?s
value declined amid weaker-than-expected economic growth data
combined with a lack of confidence for further interest rate
hikes from the Reserve Bank of New Zealand.  Within the global
interest rates futures markets, losses of approximately 0.5% were
recorded during July, August, and September from positions in
U.S. fixed-income futures as prices moved without consistent
direction amid conflicting economic data, uncertainty regarding
the future interest rate policy of the U.S., and volatility in
energy prices.  Further losses were experienced during November
from short positions in U.S. interest rate futures as prices
increased towards the beginning of the month after strong demand
at government debt auctions.  Later in November, U.S. fixed-
income futures prices were pressured higher on reduced inflation
fears and expectations that the U.S. Federal Reserve could
potentially end its cycle of hiking interest rates in early 2006.
Smaller losses in the global interest rate futures markets were
                               - 24 -
<page> recorded from positions in Canadian, Australian, and
Japanese fixed-income futures.  Smaller losses of approximately
0.3% were experienced in the agricultural markets from long
positions in corn held during the first quarter after prices
declined amid a stronger U.S. dollar and technically-based
selling.  In December, losses were recorded from short futures
positions in corn after prices advanced on reports of strong
demand and news of weaker- than-expected supplies.  Additional
losses resulted from long futures positions in cocoa held during
the third quarter as prices moved lower on hopes for political
stability in the Ivory Coast.  A portion of the Partnership?s
overall losses for the year was offset by gains of approximately
0.7% recorded in the global stock index markets, during July and
August from long positions in Japanese equity index futures as
prices trended higher on optimism about the future of the
Japanese economy.  During September, long Japanese stock index
futures positions experienced gains as prices increased sharply
on positive comments from Bank of Japan Governor Toshihiko Fukui,
who said the Japanese economy was in the process of emerging from
a soft patch.  Smaller Partnership gains of approximately 0.3%
were experienced in the energy markets primarily during March,
August, and September from long futures positions in natural gas.
During March, natural gas prices move higher in tandem with crude
oil prices, after OPEC oil ministers stated that there were no

- 25 -
<page> plans to raise output at the March 16 meeting.  Also
strengthening natural gas prices was a report by the Energy
Information Administration stating that U.S. inventories of
gasoline and heating oil measured significantly lower-than-
expected.  During the third quarter, gains were recorded as
natural gas prices climbed higher on supply and demand concerns
after Hurricane Katrina struck the Gulf of Mexico.  In the metals
markets, gains of approximately 0.1% occurred from long positions
in copper futures as prices trended higher throughout a majority
of the year amid persistent demand from China.

For an analysis of unrealized gains and (losses) by contract type
and a further description of 2007 trading results, refer to the
Partnership?s Annual Report to Limited Partners for the year ended
December 31, 2007, which is incorporated by reference to Exhibit
13.01 of this Form 10-K.

The Partnership's gains and losses are allocated among its
partners for income tax purposes.

Off-Balance Sheet Arrangements and Contractual Obligations.
The Partnership does not have any off-balance sheet arrangements,
nor does it have contractual obligations or commercial
commitments to make future payments that would affect its
liquidity or capital resources.
- 26 -
<page> Market Risk.
The Partnership is a party to financial instruments with elements
of off-balance sheet market and credit risk.  The Partnership
trades Futures Interests.  In entering into these contracts, the
Partnership is subject to the market risk that such contracts may
be significantly influenced by market conditions, such as
interest rate volatility, resulting in such contracts? being less
valuable.  If the markets should move against all of the
positions held by the Partnership at the same time, and the
Trading Advisor was unable to offset positions of the
Partnership, the Partnership could lose all of its assets and
limited partners would realize a 100% loss.

In addition to the Trading Advisor's internal controls, the
Trading Advisor must comply with the Partnership?s trading
policies that include standards for liquidity and leverage that
must be maintained.  The Trading Advisor and Demeter monitor the
Partnership's trading activities to ensure compliance with the
trading policies and Demeter can require the Trading Advisor to
modify positions of the Partnership if Demeter believes they
violate the Partnership's trading policies.




- 27 -
<page> Credit Risk.
In addition to market risk, in entering into futures, forward, and
options contracts, there is a credit risk to the Partnership that
the counterparty on a contract will not be able to meet its
obligations to the Partnership. The ultimate counterparty or
guarantor of the Partnership for futures, forward, and options
contracts, traded in the United States and most foreign exchanges
on which the Partnership trades is the clearinghouse associated
with such exchange.  In general, a clearinghouse is backed by the
membership of the exchange and will act in the event of non-
performance by one of its members or one of its member?s
customers, which should significantly reduce this credit risk.
There is no assurance that a clearinghouse, exchange, or other
exchange member will meet its obligations to the Partnership, and
Demeter and the commodity brokers will not indemnify the
Partnership against a default by such parties. Further, the law is
unclear as to whether a commodity broker has any obligation to
protect its customers from loss in the event of an exchange or
clearinghouse defaulting on trades affected for the broker?s
customers.  In cases where the Partnership trades off-exchange
forward contracts with a counterparty, the sole recourse of the
Partnership will be the forward contract?s counterparty.

Demeter deals with these credit risks of the Partnership in
several ways.  First, Demeter monitors the Partnership?s credit
                              - 28 -
<page> exposure to each exchange on a daily basis.  The commodity
brokers inform the Partnership, as with all of their customers,
of the Partnership?s net margin requirements for all of its
existing open positions, and Demeter has installed a system which
permits it to monitor the Partnership?s potential net credit
exposure, exchange by exchange, by adding the unrealized trading
gains on each exchange, if any, to the Partnership?s margin
liability thereon.

Second, the Partnership?s trading policies limit the amount of its
Net Assets that can be committed at any given time to futures
contracts and require a minimum amount of diversification in the
Partnership?s trading, usually over several different products and
exchanges.  Historically, the Partnership?s exposure to any one
exchange has typically amounted to only a small percentage of its
total Net Assets and on those relatively few occasions where the
Partnership?s credit exposure climbs above such level, Demeter
deals with the situation on a case by case basis, carefully
weighing whether the increased level of credit exposure
remains appropriate.  Material changes to the trading policies may
be made only with the prior written approval of the limited
partners owning more than 50% of Units then outstanding.



- 29 -
<page> Third, with respect to forward contract trading, the
Partnership trades with only those counterparties which Demeter,
together with MS&Co., has determined to be creditworthy.  The
Partnership presently deals with MS&Co. as the sole counterparty
on all trading of foreign currency forward contracts.

For additional information, see the ?Financial Instruments?
section under ?Notes to Consolidated Financial Statements? in the
Partnership?s Annual Report to Limited Partners for the
year ended December 31, 2007, which is incorporated by reference
to Exhibit 13.01 of this Form 10-K.

Inflation has not been a major factor in the Partnership?s
operations.

New Accounting Developments.
In July 2006, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement 109" ("FIN
48").  FIN 48 clarifies the accounting for income taxes by
prescribing the minimum recognition threshold a tax position must
meet before being recognized in the financial statements.  FIN 48
became effective for the Partnership as of January 1, 2007.  The
Partnership has determined that the adoption of FIN 48 did not
have a material impact on the Partnership?s Financial Statements.
                               - 30 -
<page> The Partnership files U.S. federal and state tax returns.
The 2004 through 2007 tax years generally remain subject to
examination by U.S. federal and most state tax authorities.

In September 2006, the FASB issued SFAS No. 157, ?Fair Value
Measurements? (?SFAS No. 157?). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. SFAS No. 157 is
effective for the Partnership as of January 1, 2008. The impact to
the Partnership?s Financial Statements, if any, is currently being
assessed.

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Introduction

The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards, and options.  The
market-sensitive instruments held by the Partnership are acquired
for speculative trading purposes only and, as a result, all or
substantially all of the Partnership?s assets are at risk of
trading loss.  Unlike an operating company, the risk of market-
sensitive instruments is inherent to the primary business
activity of the Partnership.

The futures, forwards, and options traded by the Partnership
involve varying degrees of related market risk.  Market risk is
often dependent upon changes in the level or volatility of
                              - 31 -


<page> interest rates, exchange rates, and prices of financial
instruments and commodities, factors that result in frequent
changes in the fair value of the Partnership?s open positions, and
consequently in its earnings, whether realized or unrealized, and
cash flow.  Gains and losses on open positions of exchange-traded
futures, exchange-traded forward, and exchange-traded futures-
styled options contracts are settled daily through variation
margin.  Gains and losses on off-exchange-traded forward currency
contracts are settled upon termination of the contract.  However,
the Partnership is required to meet margin requirements equal to
the net unrealized loss on open forward currency contracts in the
Partnership accounts with the counterparty, which is accomplished
by daily maintenance of the cash balance in a custody account held
at MS&Co.

The Partnership?s total market risk may increase or decrease as
it is influenced by a wide variety of factors, including, but not
limited to, the diversification among the Partnership?s open
positions, the volatility present within the markets, and the
liquidity of the markets.

The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements.  Margin requirements generally range between 2% and
                               - 32 -
<page> 15% of contract face value.  Additionally, the use of
leverage causes the face value of the market sector instruments
held by the Partnership typically to be many times the total
capitalization of the Partnership.

The Partnership?s past performance is no guarantee of its future
results.  Any attempt to numerically quantify the Partnership?s
market risk is limited by the uncertainty of its speculative
trading.  The Partnership?s speculative trading and use of
leverage may cause future losses and volatility (i.e., ?risk of
ruin?) that far exceed the Partnership?s experiences to date under
the ?Partnership?s Value at Risk in Different Market Sectors?
section and significantly exceed the Value at Risk (?VaR?) tables
disclosed.

Limited partners will not be liable for losses exceeding the
current net asset value of their investment.

Quantifying the Partnership?s Trading Value at Risk
The following quantitative disclosures regarding the Partner-
ship?s market risk exposures contain ?forward-looking statements?
within the meaning of the safe harbor from civil liability
provided for such statements by the Private Securities Litigation
Reform Act of 1995 (set forth in Section 27A of the Securities
                             - 33 -
<page> Act of 1933 and Section 21E of the Securities Exchange Act
of 1934).  All quantitative disclosures in this section are
deemed to be forward-looking statements for purposes of the safe
harbor, except for statements of historical fact.

The Partnership accounts for open positions on the basis of mark
to market accounting principles.  Any loss in the market value of
the Partnership?s open positions is directly reflected in the
Partnership?s earnings and cash flow.

The Partnership?s risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of VaR. The
Partnership estimates VaR using a model based upon historical
simulation (with a confidence level of 99%) which involves
constructing a distribution of hypothetical daily changes in the
value of a trading portfolio.  The VaR model takes into account
linear exposures risks including equity and commodity prices,
interest rates, foreign exchange rates, and correlation among
these variables. The hypothetical changes in portfolio value
are based on daily percentage changes observed in key market
indices or other market factors (?market risk factors?) to which
the portfolio is sensitive.  The one-day 99% confidence level of
the Partnership?s VaR corresponds to the negative change in
portfolio value that, based on observed market risk factors, would
                                - 34 -


<page> have been exceeded once in 100 trading days, or one day in
100.

VaR typically does not represent the worst case outcome.   Demeter
uses approximately four years of daily market data (1,000
observations) and re-values its portfolio (using delta-gamma
approximations) for each of the historical market moves that
occurred over this time period.  This generates a probability
distribution of daily ?simulated profit and loss? outcomes.  The
VaR is the appropriate percentile of this distribution.  For
example, the 99% one-day VaR would represent the 10th worst
outcome from Demeter?s simulated profit and loss series.

The Partnership?s VaR computations are based on the risk
representation of the underlying benchmark for each instrument or
contract and do not distinguish between exchange and non-exchange
dealer-based instruments.  They are also not based on exchange
and/or dealer-based maintenance margin requirements.

VaR models, including the Partnership?s, are continually evolving
as trading portfolios become more diverse and modeling techniques
and systems capabilities improve.  Please note that the VaR model
is used to numerically quantify market risk for historic reporting
purposes only and is not utilized by either Demeter or the Trading
Advisor in their daily risk management activities.  Please further
note that VaR as described above may not be comparable to
                              - 35 ?


<page> similarly-titled measures used by other entities.

The Partnership?s Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership?s open positions as a percentage of total Net Assets
by primary market risk category at December 31, 2007 and 2006.
At December 31, 2007 and 2006, the Partnership?s total
capitalization was approximately $11 million and $14 million,
respectively.

Primary Market 	  December 31, 2007	   December 31, 2006
Risk Category	  	    Value at Risk	     Value at Risk
Equity				   (0.94)%		   (0.91)%
Interest Rate		  	   (0.69)			   (0.90)
Currency		 	        (0.12)	    		   (0.14)
Commodity		  		   (0.42)	 		   (0.20)
Aggregate Value at Risk 	   (1.32)%			   (1.41)%

The VaR for a market category represents the one-day downside risk
for the aggregate exposures associated with this market category.
The Aggregate Value at Risk listed above represents the VaR of the
Partnership?s open positions across all the market categories, and
is less than the sum of the VaRs for all such market categories
due to the diversification benefit across asset classes.


- 36 -
<page> Because the business of the Partnership is the speculative
trading of futures, forwards, and options, the composition of its
trading portfolio can change significantly over any given time
period, or even within a single trading day.  Such changes could
positively or negatively materially impact market risk as
measured by VaR.

The table below supplements the December 31, 2007, VaR set forth
above by presenting the Partnership?s high, low, and average VaR,
as a percentage of total Net Assets for the four quarter-end
reporting periods from January 1, 2007, through December 31,
2007.

Primary Market Risk Category      High        Low        Average
Equity                     	   (1.54)%	(0.75)%	   (1.02)%
Interest Rate				   (0.93)		(0.69)	   (0.82)
Currency  				   (0.22)		(0.12)	   (0.17)
Commodity 				   (0.42)		(0.17)	   (0.32)
Aggregate Value at Risk          (1.83)%	(1.17)%	   (1.46)%


Limitations on Value at Risk as an Assessment of Market Risk
VaR models permit estimation of a portfolio?s aggregate market
risk exposure, incorporating a range of varied market risks,
reflect risk reduction due to portfolio diversification or hedging
activities, and can cover a wide range of portfolio assets.
                              - 37 -
<page> However, VaR risk measures should be viewed in light of the
methodology?s limitations, which include, but may not be limited
to the following:

*	past changes in market risk factors will not always result
in accurate predictions of the distributions and
correlations of future market movements;
*	changes in portfolio value caused by market movements may
differ from those of the VaR model;
*	VaR results reflect past market fluctuations applied to
current trading positions while future risk depends on
future positions;
*	VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
*	the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.

In addition, the VaR tables above, as well as the past performance
of the Partnership, give no indication of the Partnership?s
potential ?risk or ruin?.

The VaR tables provided present the results of the Partnership?s
VaR for each of the Partnership?s market risk exposures and on an
                               - 38 -


<page> aggregate basis at December 31, 2006, and for the four
quarter-end reporting periods during calendar year 2007.  VaR is
not necessarily representative of the Partnership?s historic risk,
nor should it be used to predict the Partnership?s future
financial performance or its ability to manage or monitor risk.
There can be no assurance that the Partnership?s actual losses on
a particular day will not exceed the VaR amounts indicated above
or that such losses will not occur more than once in 100 trading
days.

Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances.  These balances and any market risk they may represent
are immaterial.

The Partnership also maintains a substantial portion of its
available assets in cash at MS&Co. (Morgan Stanley DW, prior to
April 1, 2007); as of December 31, 2007, such amount is equal to
approximately 95% of the Partnership?s net asset value.  A
decline in short-term interest rates would result in a decline in
the Partnership?s cash management income. This cash flow risk is
not considered to be material.


- 39 -
<page> Materiality, as used throughout this section, is based on
an assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality, and multiplier features of the Partnership?s market-
sensitive instruments, in relation to the Partnership?s Net
Assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures ? except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures ? constitute
forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act.
The Partnership?s primary market risk exposures, as well as the
strategies used and to be used by Demeter and the Trading Advisor
for managing such exposures, are subject to numerous
uncertainties, contingencies and risks, any one of which could
cause the actual results of the Partnership?s risk controls to
differ materially from the objectives of such strategies.
Government interventions, defaults and expropriations, illiquid
markets, the emergence of dominant fundamental factors, political
upheavals, changes in historical price relationships, an influx of
new market participants, increased regulation, and many other
                                - 40 -
<page> factors could result in material losses, as well as in
material changes to the risk exposures and the risk management
strategies of the Partnership. Investors must be prepared to lose
all or substantially all of their investment in the Partnership.

The following were the primary trading risk exposures of the
Partnership at December 31, 2007, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Equity.  The largest market exposure of the Partnership at
December 31, 2007, was to the global stock index sector,
primarily to equity price risk in the G-7 countries. The G-7
countries consist of France, the U.S., Britain, Germany, Japan,
Italy, and Canada.  However, the Partnership also takes futures
positions in the government debt of smaller countries ? e.g., New
Zealand and Australia. The stock index futures traded by the
Partnership are by law limited to futures on broadly-based
indices.  At December 31, 2007, the Partnership?s primary
exposures were to the DAX (Germany), FTSE 100 (United Kingdom),
S&P 500 (U.S.), ASX AOI (Australia), CAC 40 (France), IBEX 35
(Spain), and NIKKEI 225 (Japan) stock indices.  The Partnership
is primarily exposed to the risk of adverse price trends or
static markets in the U.S., Japanese, and European stock indices.
                              - 41 -
<page> Static markets would not cause major market changes, but
would make it difficult for the Partnership to avoid trendless
price movements, resulting in numerous small losses.

Interest Rate.  The second largest market exposure of the
Partnership at December 31, 2007, was to the global interest rate
sector.  Exposure was primarily spread across Japanese, European,
U.S., Australian, and New Zealand interest rate sectors. Interest
rate movements directly affect the price of the sovereign bond
futures positions held by the Partnership and indirectly affect
the value of its stock index and currency positions.  Interest
rate movements in one country, as well as relative interest rate
movements between countries, materially impact the Partnership?s
profitability. The Partnership?s interest rate exposure is
generally to interest rate fluctuations in the U.S. and the other
G-7 countries? interest rates. Demeter anticipates that the G-7
countries? interest rates, as well as New Zealand and Australian
interest rates, will remain the primary interest rate exposures
of the Partnership for the foreseeable future.  The speculative
futures positions held by the Partnership range from short to
long-term instruments.  Consequently, changes in short, medium,
or long-term interest rates may have an effect on the
Partnership.

- 42 -
<page> Currency.  At December 31, 2007, the Partnership had
market exposure to the currency sector.  Exposure was to exchange
rate fluctuations, primarily fluctuations which disrupt the
historical pricing relationships between different currencies and
currency pairs.  Interest rate changes, as well as political and
general economic conditions, influence these fluctuations.  The
Partnership trades a large number of currencies, including cross-
rates - i.e., positions between two currencies other than the
U.S. dollar.  At December 31, 2007, the Partnership?s major
exposures were to Australian dollar and New Zealand dollar
currency crosses, as well as outright U.S. dollar positions.
Outright positions consist of the U.S. dollar vs. other
currencies.  These other currencies include major and minor
currencies.  Demeter does not anticipate that the risk associated
with the Partnership?s currency trades will change significantly
in the future.

Commodity.
Soft Commodities and Agriculturals. The third largest market
exposure of the Partnership at December 31, 2007, was to the
markets that comprise these sectors.  Most of the exposure
was to the sugar, soybeans, live cattle, soybean meal, corn,
lean hogs, orange juice, and feeder cattle markets.  Supply

- 43 -


<page> and demand inequalities, severe weather disruptions,
and market expectations affect price movements in these
markets.

Metals.  At December 31, 2007, the Partnership had market
exposure in the metals sector.  The Partnership?s metals
exposure was to fluctuations in the price of precious metals,
such as silver and gold. The Partnership also had exposure to
base metals, such as nickel and zinc.  Economic forces,
supply and demand inequalities, geopolitical factors, and
market expectations influence price movements in these
markets.  The Trading Advisor utilizes the trading system(s)
to take positions when market opportunities develop, and
Demeter anticipates that the Trading Advisor will continue to
do so.

Energy.  At December 31, 2007, the Partnership had market
exposure to the energy sector.  The Partnership?s primary
energy exposure was to futures contracts in crude oil and
its related products, as well as natural gas.  Price
movements in these markets result from geopolitical
developments, particularly in the Middle East, as well as
weather patterns, and other economic fundamentals.
Significant profits and losses, which have been experienced
in the past, are expected to continue to be experienced in
                          - 44 -


<page> the future. Natural gas has exhibited volatility in
price resulting from weather patterns and supply and demand
factors and will likely continue in this choppy pattern.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at December 31, 2007:

Foreign Currency Balances.  The Partnership?s primary
foreign currency balances at December 31, 2007, were in
British pounds, euros, Japanese yen, Australian dollars, New
Zealand dollars, South African rand, Canadian dollars,
Norwegian kroner, and Swiss francs.  The Partnership
controls the non-trading risk of foreign currency balances
by regularly converting them back into U.S. dollars upon
liquidation of their respective positions.

Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership?s open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership?s assets among different market sectors and trading
approaches, and by monitoring the performance of the Trading
                             - 45 -
<page> Advisor daily.  In addition, the Trading Advisor
establishes diversification guidelines, often set in terms of the
maximum margin to be committed to positions in any one market
sector or market-sensitive instrument.

Demeter monitors and controls the risk of the Partnership?s non-
trading instrument, cash.  Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements are incorporated by
reference to the Partnership's Annual Report, which is filed as
Exhibit 13.01 hereto.























- 46 -
<page> Supplementary data specified by Item 302 of Regulation S-K:

Summary of Quarterly Results (Unaudited)

          Total Trading Results
Quarter	     including 		   	     	    Net Income/(Loss)
Ended 	  interest income   Net Income/(Loss)      Per Unit

2007
March 31 	    $ (108,446)	       $  (316,413)	   	 $ (44.25)
June 30          629,336	           413,965		    59.90
September 30     157,999	           (52,795)	  	    (6.55)
December 31	  (83,300)	          (283,154)	  	   (46.53)

Total		    $  595,589        $  (238,397)	 	 $ (37.43)

2006
March 31 	    $  303,629	       $    56,802	   	 $   6.77
June 30           86,432	          (147,323)		   (19.19)
September 30     438,098	           207,297	  	    27.09
December 31	  227,773	               583	  	    (0.21)

Total		    $1,055,932        $   117,359	 	 $  14.46


Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
		ACCOUNTING AND FINANCIAL DISCLOSURE

None.



Item 9A.  CONTROLS AND PROCEDURES
As of the end of the period covered by this annual report, the
President and Chief Financial Officer of Demeter, the general
partner of the Partnership, have evaluated the effectiveness of
the Partnership?s disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), and have
judged such controls and procedures to be effective.
- 47 -
<page>
Management?s Report on Internal Control Over Financial Reporting
Demeter is responsible for the management of the Partnership.

Management of Demeter (?Management?) is responsible for
establishing and maintaining adequate internal control over
financial reporting.  The internal control over financial
reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
Financial Statements for external purposes in accordance with
generally accepted accounting principles.

The Partnership?s internal control over financial reporting
includes those policies and procedures that:

*	Pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Partnership;

*	Provide reasonable assurance that transactions are recorded
as necessary to permit preparation of Financial Statements in
accordance with generally accepted accounting principles, and
that the Partnership?s transactions are being made only in
accordance with authorizations of Management and directors;
and
-	48 ?
<page>
*	Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
the Partnership?s assets that could have a material effect on
the Financial Statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Partnership?s
internal control over financial reporting as of December 31,
2007.  In making this assessment, Management used the criteria
set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control-Integrated Framework.
Based on our assessment and those criteria, Management believes
that the Partnership maintained effective internal control over
financial reporting as of December 31, 2007.

Attestation Report of the Registered Public Accounting Firm
Deloitte & Touche LLP, the Partnership?s independent registered
public accounting firm, has issued an attestation report on
                            - 49 -
<page> the Partnership?s internal control over financial
reporting.  This report, which expresses an unqualified opinion on
the Partnership?s internal control over financial reporting,
appears under ?Report of Independent Registered Public Accounting
Firm? in the Partnership?s Annual Report to Limited Partners for
the year ended December 31, 2007.

Changes in Internal Control over Financial Reporting
There have been no material changes during the period covered by
this annual report in the Partnership?s internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
of the Exchange Act) or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.


Item 9A(T).  CONTROLS AND PROCEDURES
Not applicable.

Item 9B.  OTHER INFORMATION
None.










 - 50 -
<page> PART III

Item 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

There are no directors or executive officers of the Partnership.
The Partnership is managed by Demeter, its general partner.

Directors and Officers of the General Partner
The directors and executive officers of Demeter are as follows:

Effective May 1, 2006, Mr. Walter Davis, age 42, is a Director,
Chairman of the Board of Directors, and President of Demeter.  Mr.
Davis is an Executive Director at Morgan Stanley and the Director
of Morgan Stanley?s Managed Futures Department.  Prior to joining
Morgan Stanley in 1999, Mr. Davis worked for Chase Manhattan
Bank?s Alternative Investment Group.  Throughout his career, Mr.
Davis has been involved with the development, management, and
marketing of a diverse array of commodity pools, hedge funds, and
other alternative investment funds.  Mr. Davis received an M.B.A
in Finance and International Business from the Columbia University
Graduate School of Business in 1992 and a B.A. in Economics from
the University of the South in 1987.

Effective December 5, 2002, Mr. Frank Zafran, age 52, is a
Director of Demeter.  Mr. Zafran is a Managing Director at Morgan
Stanley and, in January 2007, was named Director of Annuity and
Insurance Services. Previously, Mr. Zafran was Director of the
Wealth Solutions Division. Mr. Zafran joined the firm in 1979 and
                              - 51 -
<page> has held various positions in Corporate Accounting and the
Insurance Department, including Senior Operations Officer ?
Insurance Division, until his appointment in 2000 as Director of
Retirement Plan Services, responsible for all aspects of 401(k)
Plan Services, including marketing, sales, and operations.
Subsequently, he was named Chief Administrative Officer of Morgan
Stanley?s Client Solution Division in 2002.  Mr. Zafran received a
B.S. degree in Accounting from Brooklyn College, New York.

Effective March 31, 2003, Mr. Douglas J. Ketterer, age 42, is a
Director of Demeter.  Mr. Ketterer is a Managing Director of
Morgan Stanley and is head of the Client Solutions Group.  The
Client Solutions Group is comprised of a number of departments
(including, among others, the Alternative Investments Group,
Consulting Services Group, Annuities & Insurance Department,
Mutual Fund Department, and Retirement & Equity Solutions Group),
which offer products and services through Morgan Stanley?s Global
Wealth Management Group. Mr. Ketterer joined Morgan Stanley in
1990 and has served in many roles in the corporate
finance/investment banking, asset management, and wealth
management divisions of the firm. Mr. Ketterer received his M.B.A
from New York University?s Leonard N. Stern School of Business and
his B.S. in Finance from the University at Albany?s School of
Business.


- 52 -
<page> Effective May 1, 2005, Mr. Harry Handler, age 49, is a
Director of Demeter. Mr. Handler serves as an Executive Director
at Morgan Stanley in the Global Wealth Management Group.  Mr.
Handler works in the Capital Markets Division as Equity Risk
Officer. Additionally, Mr. Handler serves as Chairman of the
Global Wealth Management Group?s Best Execution Committee and
manages the Stock Lending business.  In his prior position, Mr.
Handler was a Systems Director in Information Technology, in
charge of Equity and Fixed Income Trading Systems along with the
Special Products, such as Unit Trusts, Managed Futures, and
Annuities.  Prior to his transfer to the Information Technology
Area, Mr. Handler managed the Foreign Currency and Precious Metals
Trading Desk of Dean Witter, a predecessor company to Morgan
Stanley.  He also held various positions in the Futures Division
where he helped to build the Precious Metals Trading Operation of
Dean Witter.  Before joining Dean Witter, Mr. Handler worked at
Mocatta Metals as an Assistant to the Chairman. His roles at
Mocatta Metals included stints on the Futures Order Entry Desk and
the Commodities Exchange Trading Floor.  Additional work included
building a computerized Futures Trading System and writing a
history of the company.  Mr. Handler graduated on the Dean?s List
from the University of Wisconsin-Madison with a B.A. degree and a
double major in History and Political Science.

Effective May 1, 2006, Mr. Richard D. Gueren, age 46, is a
Director of Demeter.  Mr. Gueren is an Executive Director, Retail
                             - 53 ?
<page> Options and Transactional Futures of Morgan Stanley.  He is
responsible for marketing the options and futures product to the
firm?s approximately 600 offices and approximately 9,000 Financial
Advisors/Investment Representatives.  Mr. Gueren first joined Dean
Witter in August 1986, as a Compliance Analyst and in October 1987
became a member of the Options Strategy/Trading team.  In 1997,
Dean Witter merged with Morgan Stanley.  Mr. Gueren is the firm?s
Senior Registrant Options Principal.  He is a member of several
Morgan Stanley committees, including the firm?s National Error
Committee and Best Execution Committee.  He is an advisory member
to the Credit & Risk Committee.  Mr. Gueren is also an active
member of several exchange and industry committees, including the
Managing Directors Committee for the Chicago Board Options
Exchange, and the Retail Advisory Committees for the American
Stock Exchanges, the Philadelphia Stock Exchange, the Pacific
Stock Exchange, and the International Securities Exchange. Mr.
Gueren is also an Industry Arbitrator for FINRA and has been
seated on numerous industry cases over the past eight years. He
has also been asked to testify as an expert witness regarding
options on numerous occasions.  Mr. Gueren holds a Bachelor of
Science degree in Economics from the University of Hartford.

Effective May 1, 2006, Mr. Michael P. McGrath, age 39, is a
Director of Demeter.  Mr. McGrath is a Managing Director at Morgan
Stanley and currently serves as the Chief Operating Officer for
Private Wealth Management Americas, including Private Wealth
                               - 54 -
<page> Management North America and Private Wealth Management
Latin America.  He is also the Chairman of the Global Wealth
Management Alternative Investments Due Diligence Committee.  Prior
to his current role, Mr. McGrath was the Director of Product
Development for Morgan Stanley?s Global Wealth Management Group.
Mr. McGrath joined Morgan Stanley in May 2004, from Nuveen
Investments, a publicly traded investment management company
headquartered in Chicago, Illinois. At Nuveen, Mr. McGrath served
as a Managing Director and oversaw the development of alternative
investment products catering to the ultra-high net worth investor.
Mr. McGrath received his B.A. degree from Saint Peter?s College in
1990 and his M.B.A in Finance from New York University in 1996.

Effective May 1, 2006, Mr. Andrew Saperstein, age 41, is a
Director of Demeter.  Mr. Saperstein is Chief Operating Officer of
National Sales for the Global Wealth Management Group, and serves
as a member of the group?s Executive Committee. He is also a
member of the Morgan Stanley Management Committee.  One of the
largest businesses of its kind in the world with $690 billion in
client assets, the Global Wealth Management Group provides a range
of wealth management products and services to individuals,
businesses, and institutions.  These include brokerage and
investment advisory services, financial and wealth planning,
credit and lending, banking and cash management, annuities and
insurance, retirement and trust.  Prior to joining Morgan Stanley
                             - 55 -
<page> in March 2006, Mr. Saperstein was with Merrill Lynch as
First Vice President and Chief Operating Officer of the Direct
Division, and served as a member of the Global Private Client
Executive Committee.  In this capacity, he was responsible for the
oversight of the online brokerage unit and the Financial Advisory
Center, including the Retail Client Relationship Management group,
the Services, Operations and Technology group, the Client
Acquisition team, and the Business Development and Analysis team.
 Mr. Saperstein joined Merrill Lynch in November 2001.  Prior to
Merrill Lynch, Mr. Saperstein was a partner in the Financial
Institutions group of McKinsey & Co.  Additionally, he served as
co-leader of both the North American Asset Management and
Brokerage Practice and North American Recruiting. Mr. Saperstein
graduated cum laude from Harvard Law School and summa cum laude
from the Wharton School/College of Arts and Sciences at the
University of Pennsylvania with a dual degree in Economics and
Finance.

Effective September 22, 2006, Mr. Jacques Chappuis, age 38, is a
Director of Demeter.  Mr. Chappuis is a Managing Director of
Morgan Stanley and Head of Alternative Investments for the Global
Wealth Management Group.  Prior to joining Morgan Stanley in
August 2006, Mr. Chappuis was Head of Alternative Investments for
Citigroup?s Global Wealth Management Group and prior to that, a
Managing Director at Citigroup Alternative Investments.  Before
                               - 56 -
<page> joining Citigroup, Mr. Chappuis was a consultant at the
Boston Consulting Group, where he focused on the financial
services sector, and a corporate finance Associate at Bankers
Trust Company.  Mr. Chappuis received an M.B.A in Finance, with
honors, from the Columbia University Graduate School of Business
in 1998 and a B.A. in Finance from Tulane University in 1991.

Effective December 3, 2007, Mr. Christian Angstadt, age 46,
serves as Chief Financial Officer of Demeter.  He is an Executive
Director within Morgan Stanley?s Financial Control Group.  Mr.
Angstadt currently serves as Chief Financial Officer for Morgan
Stanley Trust FSB and Morgan Stanley Trust NA, and is responsible
for the governance and overall financial management of these
regulated banks (appointed Chief Financial Officer in May 2003).
 Since joining Morgan Stanley in April 1990, Mr. Angstadt has
held several positions within the firm?s Financial Control Group,
mostly supporting the Asset Management segment (including Chief
Financial Officer for Morgan Stanley Asset Management
Operations).  Mr. Angstadt received a B.A. in Accounting from
Montclair University.

All of the foregoing directors have indefinite terms.
- 57 -
<page> Effective December 3, 2007, Mr. Lee Horwitz no longer
serves as Chief Financial Officer of Demeter.

Code of Ethics
The Partnership has not adopted a code of ethics that applies to
the Partnership?s principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions.  The Partnership is operated by its
general partner, Demeter.  The President, Chief Financial Officer,
and each member of the Board of Directors of Demeter are employees
of Morgan Stanley and are subject to the code of ethics adopted by
Morgan Stanley, the text of which can be viewed on Morgan
Stanley?s website at http://www.morganstanley.com/ourcommitment/
code of conduct.html.

The Audit Committee
The Partnership is operated by its general partner, Demeter, and
has no audit committee and, thus, no audit committee financial
expert.

Item 11.  EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers.  As a
limited partnership, the business of the Partnership is managed by
Demeter, which is responsible for the administration of the
                              - 58 ?
<page> business affairs of the Partnership but receives no
compensation for such services.


Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS


(a)  Security Ownership of Certain Beneficial Owners - At December
31, 2007, there were no persons known to be beneficial owners of
more than 5 percent of the Units.

(b)	Security Ownership of Management - At December 31, 2007,
Demeter owned 108.030 Units of general partnership interest,
representing a 1.78 percent interest in the Partnership.



(c)	Changes in Control ? None.


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
		DIRECTOR INDEPENDENCE
Refer to Note 2 - "Related Party Transactions" of "Notes to
Consolidated Financial Statements", in the accompanying Annual
Report to Limited Partners for the year ended December 31, 2007,
which is incorporated by reference to Exhibit 13.01 of this Form
10-K.  In its capacity as the Partnership's retail commodity
broker, MS&Co. (Morgan Stanley DW, through March 31, 2007)
received commodity brokerage fees (paid and accrued by the
Partnership) of $510,056 for the year ended December 31, 2007.
- 59 -
<page> Item 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Partnership pays all accounting fees as discussed in Note 1
to the Consolidated Financial Statements, ?Operating Expenses?, in
the Annual Report to the Limited Partners for the year ended
December 31, 2007.

(1)	Audit Fees.  The aggregate fees for professional services
rendered by Deloitte & Touche LLP in connection with their audit
of the Partnership?s Consolidated Financial Statements and review
of the Consolidated Financial Statements included in our
Quarterly Reports on Form 10-Q, audit of Management?s assessments
on the effectiveness of the internal control over financial
reporting, and in connection with statutory and regulatory
filings were approximately $50,292 for the year ended December
31, 2007, and $50,684 for the year ended December 31, 2006.

(2)	Audit-Related Fees.  None.

(3)	 Tax Fees.  The Partnership did not pay Deloitte & Touche LLP
any amounts in 2007 and 2006 for professional services in
connection with tax compliance, tax advice, and tax planning.  The
Partnership engaged another unaffiliated professional firm to
provide services in connection with tax compliance, tax advice,
and tax planning.
- 60 -
<page>
(4)  All Other Fees.  None.


Because the Partnership has no audit committee, the Board of
Directors of Demeter, its general partner, functions as the audit
committee with respect to the Partnership.  The Board of Directors
of Demeter has not established pre-approval policies and
procedures with respect to the engagement of audit or permitted
non-audit services rendered to the Partnership.  Consequently, all
audit and permitted non-audit services provided by Deloitte &
Touche LLP are approved by the Board of Directors of Demeter and
communicated to Morgan Stanley.


























- 61 -


	<page> PART IV
Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1.  Listing of Financial Statements
The following Financial Statements and report of independent
registered public accounting firm, all appearing in the
accompanying Annual Report to Limited Partners for the year
ended December 31, 2007, are incorporated by reference to
Exhibit 13.01 of this Form 10-K:
-	Report of Deloitte & Touche LLP, independent registered
public accounting firm, for the years ended December 31,
2007, 2006, and 2005.

-	Consolidated Statements of Financial Condition, including
the Consolidated Schedules of Investments, as of December
31, 2007 and 2006.

-	Consolidated Statements of Operations, Consolidated
Statements of Changes in Partners? Capital, and
Consolidated Statements of Cash Flows for the years ended
December 31, 2007, 2006, and 2005.

-	Notes to Consolidated Financial Statements.

With the exception of the aforementioned information and the
information incorporated in Items 7, 8, and 13, the Annual
Report to Limited Partners for the year ended December 31,
2007, is not deemed to be filed with this report.



- 62 -
<page>
2.  Listing of Financial Statement Schedules
No Financial Statement schedules are required to be filed with
this report.

3.  Exhibits
For the exhibits incorporated by reference or filed herewith
to this report, refer to Exhibit Index on Pages E-1 to E-2.
















- 63 -



<page> SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

					MORGAN STANLEY PRINCIPAL PLUS FUND L.P.
						(Registrant)

					BY:  Demeter Management Corporation,
						General Partner

March 28, 2008			BY: /s/	Walter Davis
				 		Walter Davis,
							President


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Demeter Management Corporation.

BY: /s/ 	Walter Davis	                    	   	  March 28, 2008
	  	Walter Davis, President

    /s/    Frank Zafran       	             	   	  March 28, 2008
           Frank Zafran, Director

    /s/    Douglas J. Ketterer   	                	  March 28, 2008
           Douglas J. Ketterer, Director

    /s/    Harry Handler		                	  March 28, 2008
	    	Harry Handler, Director

    /s/ 	Richard D. Gueren     		         	   	  March 28, 2008
	 	Richard D. Gueren, Director

    /s/	Michael P. McGrath	                    	  March 28, 2008
	  	Michael P. McGrath, Director

    /s/  	Andrew Saperstein	                    	  March 28, 2008
	    	Andrew Saperstein, Director

    /s/  	Jacques Chappuis		                    	  March 28, 2008
	    	Jacques Chappuis, Director

    /s/  	Christian Angstadt	                     	  March 28, 2008
	    	Christian Angstadt, Chief Financial Officer




<page> EXHIBIT INDEX

ITEM

3.01		Amended and Restated Limited Partnership Agreement of the
Partnership, dated as of August 29, 1995, is incorporated by
reference to Exhibit 3.01 and Exhibit 3.02 of the
Partnership's Registration Statement (File No. 33-95414) on
Form S-1.

3.02		Certificate of Limited Partnership, dated August 24, 1989,
is incorporated by reference to Exhibit 3.02 of the
Partnership?s Form 10-K (File No. 0-18314) for fiscal year
ended December 31, 2006, filed with the Securities and
Exchange Commission on March 23, 2007.

	3.02(a)Certificate of Amendment to the Certificate of Limited
Partnership, dated July 20, 2006 (changing its name from
Dean Witter Principal Plus Fund L.P.), is incorporated by
reference to Exhibit 3.02 of the Partnership's Form 8-K
(File No. 0-18314) filed with the Securities and Exchange
Commission on July 26, 2006.

10.01	Amended and Restated Management Agreement among the
Partnership, Demeter, and SSARIS Advisors, LLC (formerly
known as RXR, Inc.), dated as of December 29, 1995, is
incorporated by reference to Exhibit 10.02 of the
Partnership's Registration Statement (File No. 33-95414) on
Form S-1.

10.03	Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW, dated as of June 22,
2000, is incorporated by reference to Exhibit 10.01 of the
Partnership?s Form 8-K (File NO. 0-18314) filed with the
Securities and Exchange Commission on November 13, 2001.

10.04	Commodity Futures Customer Agreement between MS&Co. and the
Partnership, and acknowledged and agreed to by Morgan
Stanley DW, dated as of May 1, 2000, is incorporated by
reference to Exhibit 10.02 of the Partnership?s Form 8-K
(File No. 0-18314) filed with the Securities and Exchange
Commission on November 13, 2001.

10.05	Customer Agreement between the Partnership and MSIP dated as
of May 1, 2000, is incorporated by reference to Exhibit
10.04 of the Partnership?s Form 8-K (File No. 0-18314) filed
with the Securities and Exchange Commission on November 13,
2001.

E-1
<page>
 10.06	Foreign Exchange and Options Master Agreement between
MS&Co. and the Partnership, dated as of April 30, 2000, is
incorporated by reference to Exhibit 10.05 of the
Partnership?s Form 8-K (File No. 0-18314) filed with the
Securities and Exchange Commission on November 13, 2001.

 10.07	Securities Account Control Agreement among the Partnership
and MS&Co. dated as of May 1, 2000, is incorporated by
reference to Exhibit 10.03 of the Partnership?s Form 8-K
(File No. 0-18314) filed with the Securities and Exchange
Commission on November 13, 2001.

	13.01	December 31, 2007, Annual Report to Limited Partners is
filed herewith.

31.01	Certification of President of Demeter Management
Corporation, the general partner of the Partnership
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.02	Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

32.01	Certification of President of Demeter Management Corpor-
ation, the general partner of the Partnership, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.

32.02	Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


E-2
<PAGE>

                                                                      Principal
                                                                           Plus
                                                                           Fund
            December 31, 2007
            Annual Report

    [LOGO]

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

HISTORICAL FUND PERFORMANCE

Presented below is the percentage change in Net Asset Value per Unit from the
start of each calendar year the Fund has traded. Also provided is the
inception-to-date return and the compound annualized return since inception for
the Fund. Past performance is no guarantee of future results.

<TABLE>
<CAPTION>


                   1990      1991 1992 1993 1994  1995 1996  1997 1998 1999  2000 2001 2002 2003 2004  2005  2006 2007
FUND                %         %    %    %    %     %    %     %    %    %     %    %    %    %    %     %     %    %
------------------------------------------------------------------------------------------------------------------------
<S>            <C>           <C>  <C>  <C>  <C>   <C>  <C>   <C>  <C>  <C>   <C>  <C>  <C>  <C>  <C>   <C>   <C>  <C>
Principal Plus
 Fund.........      7.5      10.4 9.4  11.6 (8.6) 18.0 (5.3) 15.4 10.5 (3.8) 7.0  2.1  2.4  1.1  (4.1) (3.8) 0.8  (2.0)
               (10 1/2 mos.)
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
               INCEPTION-  COMPOUND
                TO-DATE   ANNUALIZED
                 RETURN     RETURN
FUND               %          %
------------------------------------
<S>            <C>        <C>
Principal Plus
 Fund.........    87.2       3.6

------------------------------------
</TABLE>

<PAGE>

DEMETER MANAGEMENT CORPORATION

522 Fifth Avenue, 13th Floor
New York, NY 10036
Telephone (212) 296-1999

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.
ANNUAL REPORT
2007

Dear Limited Partner:

  This marks the eighteenth annual report for the Morgan Stanley Principal Plus
Fund L.P. (the "Fund"). The Fund began the year at a Net Asset Value per Unit
of $1,909.85 and returned -2.0% to $1,872.42 on December 31, 2007. Since its
inception in February 1990, the Fund has returned 87.2% (a compound annualized
return of 3.6%).

  Detailed performance information for the Fund is located in the body of the
financial report. (Note: all returns are net of all fees). We provide a trading
results by sector chart that portrays trading gains and trading losses for the
year in each sector in which the Fund participates.

  The trading results by sector chart indicates the year's composite percentage
returns generated by the specific assets dedicated to trading within each
market sector in which the Fund participates. Please note that there is not an
equal amount of assets in each market sector, and the specific allocations of
assets by the Fund to each sector will vary over time within a predetermined
range. Below the chart is a description of the factors that influenced trading
gains and trading losses within the Fund during the year.

  Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation, 522 Fifth Avenue, 13th Floor, New York,
NY 10036, or your Morgan Stanley Financial Advisor.

<PAGE>

  I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is no
guarantee of future results.

Sincerely,

/s/ Walter Davis
Walter J. Davis
Chairman of the Board of Directors and President
Demeter Management Corporation,
General Partner of
Morgan Stanley Principal Plus Fund L.P.



 Managed futures investments are speculative, involve a high degree of risk,
use significant leverage, are generally illiquid, have substantial charges, are
subject to conflicts of interest, and are suitable only for the risk capital
portion of an investor's portfolio. Before investing in any managed futures
investment, qualified investors should read the prospectus or offering
documents carefully for additional information with respect to charges,
expenses, and risks. Past performance is no guarantee of future results.

 This report is based on information from multiple sources and Morgan Stanley
makes no representation as to the accuracy or completeness of information from
sources outside of Morgan Stanley.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

                                        [CHART]


Year ended December 31, 2007

                                   YTD
                                  ------
Currencies                            0.58%
Interest Rates                        3.25%
Stock Indices                        -5.66%
Energies                              0.61%
Metals                                0.48%
Agriculturals                         0.46%


Note:Includes trading results and commissions but does not include other fees
     or interest income.

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
..  Trading losses were incurred within the global stock index sector during
   February and early March from long positions in U.S., European, and Pacific
   Rim stock index futures as prices reversed sharply lower after a massive
   sell-off in the global equity markets that began on February 27, 2007,
   following comments from former U.S. Federal Reserve Chairman Alan Greenspan
   that the U.S. economy could be due for a recession. In addition, worries
   that tighter credit conditions in China and Japan might dampen global growth
   first sent Chinese stock markets plunging before the sell-off spread to
   other equity markets. During July, August, November, and December, long
   positions in U.S. and European equity index futures resulted in further
   losses as prices fell sharply on concerns that a widening credit crunch,
   sparked by U.S. sub-prime mortgage losses, would erode global economic
   growth and corporate earnings.

FACTORS INFLUENCING ANNUAL TRADING GAINS:
..  Trading gains were experienced in the global interest rate sector during
   January, May, and June from short positions in U.S., German, and Japanese
   fixed-income futures as prices trended lower as consistently strong economic
   data and rising global equity prices resulted in reduced demand for the
   "safe haven" of fixed-income investments. In addition, prices moved higher
   on investor sentiment that the respective central banks would need to raise
   interest rates in order to curb inflation. During August, September, and
   November, newly established long positions in U.S., German, and Japanese
   fixed-income futures resulted in gains as prices increased in a worldwide
   "flight-to-quality" after volatility in global equity markets, spurred by
   losses in the U.S. sub-prime mortgage sector, caused investors to seek the
   "safety" of government bonds.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.
FACTORS INFLUENCING ANNUAL TRADING GAINS: (continued)


..  Additional gains were recorded in the energy sector during March, April,
   July, October, and December from long futures positions in crude oil and its
   related products as prices trended higher due to persistent concerns that
   instability in Iraq and tension over Iran's nuclear program would negatively
   affect global supply. In addition, energy prices increased amid continued
   weakness in the U.S. dollar as U.S. dollar-denominated assets became more
   attractive to investors.

..  Gains were also achieved in the currency sector in April, September, and
   October from long positions in the euro and British pound versus the U.S.
   dollar, as well as outright short positions in the U.S. Dollar Index, as the
   value of the U.S. dollar weakened against its major rivals leading up to and
   after the U.S. Federal Reserve's decisions to cut interest rates in order to
   spur economic growth after the collapse of the sub-prime mortgage market.
   Conversely, strong economic data out of the European Union and the United
   Kingdom added to growing investor sentiment that these respective central
   banks would raise interest rates in order to combat inflation.

..  Smaller gains were experienced in the metals markets during February, March,
   and April from long positions in nickel and copper futures as prices moved
   higher on speculation that low stockpiles would create a supply shortage in
   the future and after the International Monetary Fund's strong global growth
   forecasts bolstered sentiment that demand for base metals would increase
   this year. Further gains were recorded from newly established short
   positions in nickel futures as prices moved lower during June and November
   on news that China would cut stainless steel output. Elsewhere in the metals
   complex, short positions in silver futures resulted in gains primarily
   during March and June as prices fell amid speculative selling.

..  Finally, gains were recorded in the agricultural complex during February
   from long futures positions in the soybean complex as prices rose on
   speculative buying, news of persistent global demand, and worries that
   drought conditions in the western U.S. would cause a shortage in the spring
   harvest of 2007. Prices increased further during September and December amid
   sentiment that the rising cost of oil might boost demand for alternative
   biofuels and on concerns of diminishing supplies in Brazil and Argentina,
   two of the world's largest exporters.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

  Demeter Management Corporation ("Demeter"), the general partner of Morgan
Stanley Principal Plus Fund L.P. (the "Partnership"), is responsible for the
management of the Partnership.

  Management of Demeter ("Management") is responsible for establishing and
maintaining adequate internal control over financial reporting. The internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles.

  The Partnership's internal control over financial reporting includes those
policies and procedures that:

..  Pertain to the maintenance of records that, in reasonable detail, accurately
   and fairly reflect the transactions and dispositions of the assets of the
   Partnership;

..  Provide reasonable assurance that transactions are recorded as necessary to
   permit preparation of financial statements in accordance with generally
   accepted accounting principles, and that the Partnership's transactions are
   being made only in accordance with authorizations of Management and
   directors; and

..  Provide reasonable assurance regarding prevention or timely detection of
   unauthorized acquisition, use or disposition of the Partnership's assets
   that could have a material effect on the financial statements.

  Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

<PAGE>

  Management assessed the effectiveness of the Partnership's internal control
over financial reporting as of December 31, 2007. In making this assessment,
Management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control--Integrated
Framework. Based on our assessment and those criteria, Management believes that
the Partnership maintained effective internal control over financial reporting
as of December 31, 2007.

  Deloitte & Touche LLP, the Partnership's independent registered public
accounting firm, has issued an audit report on the Partnership's internal
control over financial reporting. This report, which expresses an unqualified
opinion on the Partnership's internal control over financial reporting, appears
under "Report of Independent Registered Public Accounting Firm" on the
following page.

/s/ Walter Davis
Walter J. Davis
President
Demeter Management Corporation

/s/ Christian M. Angstadt
Christian M. Angstadt
Chief Financial Officer
Demeter Management Corporation

New York, New York
March 20, 2008

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Limited Partners and the General Partner:

  We have audited the internal control over financial reporting of Morgan
Stanley Principal Plus Fund L.P. (the "Partnership") as of December 31, 2007,
based on criteria established in Internal Control--Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. The
Partnership's management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying
Management's Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Partnership's internal control
over financial reporting based on our audit.

  We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.

  A company's internal control over financial reporting is a process designed
by, or under the supervision of, the company's principal executive and
principal financial officers, or persons performing similar functions, and
effected by the company's board of directors, management, and other personnel
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and

<PAGE>

dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.

  Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

  In our opinion, the Partnership maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2007,
based on the criteria established in Internal Control--Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.

  We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial
statements as of and for the year ended December 31, 2007 of the Partnership
and our report dated March 20, 2008 expressed an unqualified opinion on those
financial statements.

/s/ Deloitte & Touche LLP

New York, New York
March 20, 2008


<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Limited Partners and the General Partner:

  We have audited the accompanying consolidated statements of financial
condition of Morgan Stanley Principal Plus Fund L.P. (the "Partnership") and
its subsidiary Morgan Stanley Principal Plus Fund Management L.P. (the "Trading
Company"), including the consolidated schedules of investments, as of December
31, 2007 and 2006, and the related consolidated statements of operations,
changes in partners' capital, and cash flows for each of the three years in the
period ended December 31, 2007. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

  We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

  In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Partnership and
the Trading Company at December 31, 2007 and 2006, and the consolidated results
of their operations, changes in partners' capital, and their cash flows for
each of the three years in the period ended December 31, 2007, in conformity
with accounting principles generally accepted in the United States of America.

  As discussed in Note 1, the Partnership modified its classification of cash
within the consolidated statements of financial condition and cash flows to
conform to 2007 presentation.

<PAGE>

  We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Partnership's internal control
over financial reporting as of December 31, 2007, based on the criteria
established in Internal Control--Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission and our report dated
March 20, 2008 expressed an unqualified opinion on the Partnership's internal
control over financial reporting.

/s/ Deloitte & Touche LLP

New York, New York
March 20, 2008

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                               -----------------------
                                                   2007        2006
                                               -----------  ----------
                                                    $           $
<S>                                            <C>          <C>
                              ASSETS
Trading Equity:
  Unrestricted cash                             10,672,528  13,494,110
  Restricted cash                                  794,923     732,672
                                               -----------  ----------
    Total cash                                  11,467,451  14,226,782
                                               -----------  ----------
  Net unrealized gain on open
   contracts (MS&Co.)                              175,590      10,199
  Net unrealized gain (loss) on open
   contracts (MSIP)                                 (1,445)     11,335
                                               -----------  ----------
    Total net unrealized gain on open
     contracts                                     174,145      21,534
                                               -----------  ----------
    Total Trading Equity                        11,641,596  14,248,316
Interest receivable (MS&Co.)                        27,058      56,037
                                               -----------  ----------
    Total Assets                                11,668,654  14,304,353
                                               ===========  ==========

                 LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES

Redemptions payable                                135,954     137,293
Accrued administrative expenses                    108,641      99,434
Accrued brokerage fees (MS&Co.)                     38,533      47,350
Accrued management fees                              9,633      11,838
                                               -----------  ----------
    Total Liabilities                              292,761     295,915
                                               -----------  ----------
Minority Interest                                      294       3,253
                                               -----------  ----------

PARTNERS' CAPITAL

Limited Partners (5,967.302 and
 7,225.105 Units, respectively)                 11,173,321  13,798,864
General Partner (108.030 Units)                    202,278     206,321
                                               -----------  ----------
    Total Partners' Capital                     11,375,599  14,005,185
                                               -----------  ----------
    Total Liabilities and Partners' Capital     11,668,654  14,304,353
                                               ===========  ==========

NET ASSET VALUE PER UNIT                          1,872.42    1,909.85
                                               ===========  ==========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                           FOR THE YEARS ENDED
                                              DECEMBER 31,
                                    --------------------------------
                                      2007       2006        2005
                                    ---------  ---------  ----------
                                        $          $           $
<S>                                 <C>        <C>        <C>
INVESTMENT INCOME
Interest income (MS&Co.)              525,829    670,065     533,955
                                    ---------  ---------  ----------
EXPENSES
Brokerage fees (MS&Co.)               510,056    619,616     777,878
Administrative expenses               142,000    115,000     125,000
Management fees                       127,514    154,904     194,470
Transaction fees and costs             57,375     48,554      37,036
                                    ---------  ---------  ----------
   Total Expenses                     836,945    938,074   1,134,384
                                    ---------  ---------  ----------
NET INVESTMENT LOSS                  (311,116)  (268,009)   (600,429)
                                    ---------  ---------  ----------
TRADING RESULTS
Trading profit (loss):
  Realized                            (82,851)   253,642      43,091
  Net change in unrealized            152,611    132,225    (268,415)
                                    ---------  ---------  ----------
                                       69,760    385,867    (225,324)
Proceeds from Litigation Settlement     --         --          6,754
                                    ---------  ---------  ----------
   Total Trading Results               69,760    385,867    (218,570)
                                    ---------  ---------  ----------
NET INCOME (LOSS) BEFORE
 MINORITY INTEREST                   (241,356)   117,858    (818,999)
Less: Minority interest                (2,959)       499     (10,245)
                                    ---------  ---------  ----------
NET INCOME (LOSS)                    (238,397)   117,359    (808,754)
                                    =========  =========  ==========

NET INCOME (LOSS) ALLOCATION:
Limited Partners                     (234,354)   115,797    (798,146)
General Partner                        (4,043)     1,562     (10,608)

NET INCOME (LOSS) PER UNIT:
Limited Partners                       (37.43)     14.46      (74.61)
General Partner                        (37.43)     14.46      (74.61)

                                      UNITS      UNITS       UNITS
                                    ---------  ---------  ----------

WEIGHTED AVERAGE NUMBER
OF UNITS OUTSTANDING                6,632.490  8,049.758  10,049.582
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005

<TABLE>
<CAPTION>
                    UNITS OF
                   PARTNERSHIP  LIMITED    GENERAL
                    INTEREST    PARTNERS   PARTNER     TOTAL
                   ----------- ----------  -------  ----------
                                   $          $          $
<S>                <C>         <C>         <C>      <C>
Partners' Capital,
December 31, 2004  11,303.801  21,965,072  303,439  22,268,511
Net loss               --        (798,146) (10,608)   (808,754)
Redemptions        (2,376.434) (4,450,827) (88,072) (4,538,899)
                   ----------  ----------  -------  ----------
Partners' Capital,
December 31, 2005   8,927.367  16,716,099  204,759  16,920,858
Net income             --         115,797    1,562     117,359
Redemptions        (1,594.232) (3,033,032)    --    (3,033,032)
                   ----------  ----------  -------  ----------
Partners' Capital,
December 31, 2006   7,333.135  13,798,864  206,321  14,005,185
Net loss               --        (234,354)  (4,043)   (238,397)
Redemptions        (1,257.803) (2,391,189)    --    (2,391,189)
                   ----------  ----------  -------  ----------
Partners' Capital,
December 31, 2007   6,075.332  11,173,321  202,278  11,375,599
                   ==========  ==========  =======  ==========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                  FOR THE YEARS ENDED DECEMBER 31,
                                -----------------------------------
                                    2007        2006        2005
                                -----------  ----------  ----------
                                     $           $           $
<S>                             <C>          <C>         <C>
CASH FLOWS FROM
 OPERATING ACTIVITIES
Net income (loss)                  (238,397)    117,359    (808,754)
Noncash items included in
 net income (loss):
  Net change in unrealized         (152,611)   (132,225)    268,415
(Increase) decrease in
 operating assets:
  Restricted cash                   (62,251)     40,787     484,122
  Interest receivable (MS&Co.)       28,979      (2,486)    (16,803)
Increase (decrease) in
 operating liabilities:
  Accrued administrative
   expenses                           9,207     (21,445)      1,323
  Accrued brokerage fees
   (MS&Co.)                          (8,817)    (10,226)    (18,946)
  Accrued management fees            (2,205)     (2,555)     (4,737)
                                -----------  ----------  ----------
Net cash used for operating
 activities                        (426,095)    (10,791)    (95,380)
                                -----------  ----------  ----------

CASH FLOWS FROM
 FINANCING ACTIVITIES
Increase (decrease) in
 minority interest                   (2,959)        499     (10,246)
Cash paid for redemptions
 of Units                        (2,392,528) (3,172,817) (4,841,180)
                                -----------  ----------  ----------
Net cash used for financing
 activities                      (2,395,487) (3,172,318) (4,851,426)
                                -----------  ----------  ----------

Net decrease in unrestricted
 cash                            (2,821,582) (3,183,109) (4,946,806)

Unrestricted cash at beginning
 of period                       13,494,110  16,677,219  21,624,025
                                -----------  ----------  ----------

Unrestricted cash at end
 of period                       10,672,528  13,494,110  16,677,219
                                ===========  ==========  ==========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

CONSOLIDATED SCHEDULES OF INVESTMENTS

DECEMBER 31, 2007 AND 2006

<TABLE>
<CAPTION>
                                    LONG UNREALIZED  PERCENTAGE   SHORT UNREALIZED  PERCENTAGE   NET UNREALIZED
FUTURES AND FORWARD CONTRACTS:        GAIN/(LOSS)   OF NET ASSETS   GAIN/(LOSS)    OF NET ASSETS  GAIN/(LOSS)
------------------------------      --------------- ------------- ---------------- ------------- --------------
2007 PARTNERSHIP NET ASSETS:
$11,375,599                                $              %              $               %             $
<S>                                 <C>             <C>           <C>              <C>           <C>
Commodity                                36,831          0.32          (2,953)         (0.03)        33,878
Equity                                   77,062          0.68          (8,416)         (0.07)        68,646
Foreign currency                           --             --            4,126           0.04          4,126
Interest rate                            41,660          0.36          (7,908)         (0.07)        33,752
                                        -------         -----         -------          -----        -------
 Grand Total:                           155,553          1.36         (15,151)         (0.13)       140,402
                                        =======         =====         =======          =====
 Unrealized Currency Gain                                                                            33,743
                                                                                                    -------
 Total Net Unrealized Gain                                                                          174,145
                                                                                                    =======
2006 PARTNERSHIP NET ASSETS:
$14,005,185
Commodity                                 6,542          0.05          28,610           0.20         35,152
Equity                                    6,338          0.05            --              --           6,338
Foreign currency                         (5,450)        (0.04)           (788)         (0.01)        (6,238)
Interest rate                           (59,578)        (0.43)         77,876           0.56         18,298
                                        -------         -----         -------          -----        -------
 Grand Total:                           (52,148)        (0.37)        105,698           0.75         53,550
                                        =======         =====         =======          =====
 Unrealized Currency Loss                                                                           (32,016)
                                                                                                    -------
 Total Net Unrealized Gain                                                                           21,534
                                                                                                    =======
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION.  Morgan Stanley Principal Plus Fund L.P. (the "Partnership") is a
limited partnership organized to engage primarily in the speculative trading of
futures contracts, options on futures contracts, and forward contracts on
physical commodities, and other commodity interests (collectively, "Futures
Interests").
  Effective July 20, 2006, Dean Witter Principal Plus Fund L.P. was renamed to
Morgan Stanley Principal Plus Fund L.P.
  The Partnership's general partner is Demeter Management Corporation
("Demeter"). The commodity brokers are Morgan Stanley & Co. Incorporated
("MS&Co.") and Morgan Stanley & Co. International plc ("MSIP"). MS&Co. acts as
the counterparty on all trading of foreign currency forward contracts. Demeter,
MS&Co., and MSIP are wholly-owned subsidiaries of Morgan Stanley.
  The trading advisor to the Partnership is SSARIS Advisors, LLC ("SSARIS" or
the "Trading Advisor"). Morgan Stanley Principal Plus Fund Management L.P. (the
"Trading Company") was established solely to trade in Futures Interests on
behalf of the Partnership.
  Effective October 5, 2006, Dean Witter Principal Plus Fund Management L.P.
was renamed to Morgan Stanley Principal Plus Fund Management L.P.
  On April 1, 2007, Morgan Stanley merged Morgan Stanley DW Inc. ("Morgan
Stanley DW") into MS&Co. Upon completion of the merger, the surviving entity,
MS&Co., became the Partnership's principal U.S. commodity broker-dealer.
  On April 13, 2007, Morgan Stanley & Co. International Limited changed its
name to Morgan Stanley & Co. International plc.
  Demeter is required to maintain a 1% minimum interest in the equity of the
Partnership and income (losses) are shared by Demeter and the limited partners
based upon their proportional ownership interests.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


USE OF ESTIMATES.  The financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make estimates and assumptions that affect the reported
amounts in the financial statements and related disclosures. Management
believes that the estimates utilized in the preparation of the financial
statements are prudent and reasonable. Actual results could differ from those
estimates.

PRINCIPLES OF CONSOLIDATION.  The consolidated financial statements include the
accounts of the Partnership and the Trading Company. All intercompany balances
have been eliminated.
  The ownership by Demeter in the Trading Company represents a minority
interest in the Partnership. Demeter's share of the Trading Company's profits
or losses is deducted from consolidated results of operations.

REVENUE RECOGNITION.  Futures Interests are open commitments until settlement
date, at which time they are realized. They are valued at market on a daily
basis and the resulting net change in unrealized gains and losses is reflected
in the change in unrealized trading profit (loss) on open contracts from one
period to the next on the Consolidated Statements of Operations. Monthly,
MS&Co. pays interest income on 100% and 90% of the Partnership's and the
Trading Company's, respectively, average daily Net Assets, as defined in the
Limited Partnership Agreement, for the month at a rate equal to the monthly
average yield on the 4-week U.S. Treasury bill discount rate during such month.
For purposes of such interest payments, Net Assets do not include monies owed
to the Partnership and the Trading Company on Futures Interests.
  The Partnership's functional currency is the U.S. dollar; however, the
Partnership may transact business in currencies other than the U.S. dollar.
Assets and liabilities denominated in currencies other than the U.S. dollar are
translated into U.S. dollars at the rates in effect at the date of the
Consolidated Statements of Financial Condition. Income and expense items
denominated in currencies other than the U.S. dollar are translated into U.S.
dollars at the rates in effect during the period. Gains and losses resulting
from the translation to U.S. dollars are reported in income currently.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


NET INCOME (LOSS) PER UNIT.  Net income (loss) per unit of limited partnership
interest ("Unit(s)") is computed using the weighted average number of Units
outstanding during the period.

NEW ACCOUNTING DEVELOPMENTS.  In July 2006, the Financial Accounting Standards
Board ("FASB") issued Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement 109" ("FIN 48"). FIN 48
clarifies the accounting for income taxes by prescribing the minimum
recognition threshold a tax position must meet before being recognized in the
financial statements. FIN 48 became effective for the Partnership as of January
1, 2007. The Partnership has determined that the adoption of FIN 48 did not
have a material impact on the Partnership's financial statements. The
Partnership files U.S. federal and state tax returns. The 2004 through 2007 tax
years generally remain subject to examination by U.S. federal and most state
tax authorities.
  In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements.
SFAS No. 157 is effective for the Partnership as of January 1, 2008. The impact
to the Partnership's financial statements, if any, is currently being assessed.

TRADING EQUITY.  The Partnership's asset "Trading Equity," reflected on the
Consolidated Statements of Financial Condition, consists of (A) cash on deposit
with MS&Co. and MSIP to be used as margin for trading; (B) net unrealized gains
or losses on futures and forward contracts, which are valued at market and
calculated as the difference between original contract value and market value;
and if any, (C) options purchased at fair value. Options written at fair value
are recorded in Liabilities.
  The Partnership, in the normal course of business, enters into various
contracts with MS&Co. and MSIP acting as its commodity brokers. Pursuant to
brokerage agreements with MS&Co. and MSIP, to the extent that such trading
results in unrealized gains or losses, these amounts are offset and reported on
a net basis on the Partnership's Consolidated Statements of Financial Condition.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

 The Partnership has offset the fair value amounts recognized for forward
contracts executed with the same counterparty as allowable under the terms of
its master netting agreement with MS&Co., the sole counterparty on such
contracts. The Partnership has consistently applied its right to offset.

BROKERAGE FEES AND RELATED TRANSACTION FEES AND COSTS.  The monthly brokerage
fee is equal to  1/3 of 1% per month (a 4% annual rate) of the Partnership's
adjusted month-end Net Assets. Transaction fees and costs are accrued on a
half-turn basis. In 2007, 2006, and 2005, the brokerage fees charged were the
equivalent of a roundturn commission charge of approximately $54, $70, and
$120, respectively, per contract traded.

OPERATING EXPENSES.  The Partnership bears all operating expenses related to
its trading activities. These include filing fees, clerical, administrative,
auditing, accounting, mailing, printing, and other incidental operating
expenses as permitted by the Limited Partnership Agreement. In addition, the
Partnership incurs a monthly management fee and may incur an incentive fee.
Demeter bears all other operating expenses.

REDEMPTIONS.  Limited partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit as of the last day of any month upon five business
days advance notice by redemption form to Demeter.

DISTRIBUTIONS.  Distributions, other than redemptions of Units, will be made on
a pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date. Demeter does not intend to make any distributions of the
Partnership's profits.

INCOME TAXES.  No provision for income taxes has been made in the accompanying
consolidated financial statements, as partners are individually responsible for
reporting income or loss based upon their respective share of the Partnership's
revenues and expenses for income tax purposes.

DISSOLUTION OF THE PARTNERSHIP.  The Partnership will terminate on December 31,
2025, or at an earlier date if certain conditions set forth in the Limited
Partnership Agreement occur.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

  The Trading Company may terminate operations if its Net Assets decline to 5%
or less of consolidated Partnership Net Assets, and will terminate operations
if its Net Assets decline to less than 3% of consolidated Partnership Net
Assets. At December 31, 2007 and 2006, the Trading Company had Net Assets of
$11,451,802 and $14,098,880, respectively, which represented 101% of the
consolidated Partnership's Net Assets at the respective dates.

LITIGATION SETTLEMENT.  The Partnership received notification of a preliminary
entitlement to payment from the Sumitomo Copper Litigation Settlement
Administrator, and the Partnership received a settlement award payment in the
amount of $6,754 during November 2005. Any amounts received are accounted for
in the period received, for the benefit of the limited partners at the date of
receipt.
RESTRICTED AND UNRESTRICTED CASH.  As reflected on the Partnership's
Consolidated Statements of Financial Condition, restricted cash represents cash
on deposit to satisfy margin requirements for trading. These amounts of
restricted cash are maintained separately. Cash that is not on deposit to
satisfy the margin requirements for trading is reflected as unrestricted cash.

RECLASSIFICATIONS.  Certain prior year amounts relating to cash balances were
reclassified on the Consolidated Statements of Financial Condition and Cash
Flows to conform to 2007 presentation. Such reclassifications have no impact on
the Partnership's reported net income (loss).

--------------------------------------------------------------------------------
2. RELATED PARTY TRANSACTIONS
The Trading Company pays a monthly brokerage fee to MS&Co. (Morgan Stanley DW
through March 31, 2007) as described in Note 1. The Partnership's and Trading
Company's cash is on deposit with Morgan Stanley DW (through March 31, 2007),
MS&Co., and MSIP in futures interests trading accounts to meet margin
requirements as needed. MS&Co. (Morgan Stanley DW through March 31, 2007) pays
interest on these funds as described in Note 1. Pursuant to the Limited
Partnership Agreement, Demeter initially invested $200,000 of General
Partnership Interest in the Trading Company.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)


--------------------------------------------------------------------------------
3. TRADING ADVISOR
Demeter, on behalf of the Trading Company and itself, has entered into a
Management Agreement with SSARIS to make all trading decisions for the Trading
Company.
  Compensation to SSARIS consists of a management fee and an incentive fee as
follows:

MANAGEMENT FEE.  The Partnership pays a monthly management fee equal to  1/12
of 1% per month (a 1% annual rate) of the Partnership's Adjusted Net Assets, as
defined in the Limited Partnership Agreement, as of the last day of each month.

INCENTIVE FEE.  The Partnership pays an annual incentive fee to SSARIS equal to
15% of the "New Appreciation", as defined in the Limited Partnership Agreement,
of the Trading Company's Net Assets as of the end of each annual incentive
period ending December 31. Such incentive fee is accrued in each month in which
New Appreciation occurs. In those months in which New Appreciation is negative,
previous accruals, if any, during the incentive period are reduced.

--------------------------------------------------------------------------------
4. FINANCIAL INSTRUMENTS
The Partnership trades Futures Interests. Futures and forwards represent
contracts for delayed delivery of an instrument at a specified date and price.
Risk arises from changes in the value of these contracts and the potential
inability of counterparties to perform under the terms of the contracts. There
are numerous factors which may significantly influence the market value of
these contracts, including interest rate volatility.
  The market value of exchange-traded contracts is based on the settlement
price quoted by the exchange on the day with respect to which market value is
being determined. If an exchange-traded contract could not have been liquidated
on such day due to the operation of daily limits or other rules of the
exchange, the settlement price shall be the settlement price on the first
subsequent day on which the contract could be liquidated. The market value of
off-exchange-traded contracts is based on the fair market value quoted by the
counterparty.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

  The Partnership's contracts are accounted for on a trade-date basis and
marked to market on a daily basis. The Partnership accounts for its derivative
investments in accordance with the provisions of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS No. 133"). SFAS No. 133 defines a derivative as a
financial instrument or other contract that has all three of the following
characteristics:

(1)One or more underlying notional amounts or payment provisions;

(2)Requires no initial net investment or a smaller initial net investment than
   would be required relative to changes in market factors;

(3)Terms require or permit net settlement.

  Generally, derivatives include futures, forward, swap or options contracts,
and other financial instruments with similar characteristics such as caps,
floors, and collars.
  The net unrealized gains on open contracts at December 31, reported as a
component of "Trading Equity" on the Consolidated Statements of Financial
Condition, and their longest contract maturities were as follows:

<TABLE>
<CAPTION>
        NET UNREALIZED GAINS
          ON OPEN CONTRACTS      LONGEST MATURITIES
     --------------------------- -------------------
                 OFF-                        OFF-
     EXCHANGE- EXCHANGE-         EXCHANGE- EXCHANGE-
YEAR  TRADED    TRADED    TOTAL   TRADED    TRADED
---- --------- --------- ------- --------- ---------
         $         $        $
<S>  <C>       <C>       <C>     <C>       <C>
2007  174,145     --     174,145 Jun. 2008    --
2006   21,534     --      21,534 Jun. 2007    --
</TABLE>

  The Partnership has credit risk associated with counterparty nonperformance.
As of the date of the financial statements, the credit risk associated with the
instruments in which the Partnership trades is limited to the amounts reflected
on the Partnership's Consolidated Statements of Financial Condition.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

  The Partnership also has credit risk because MS&Co. and MSIP act as the
futures commission merchants or the counterparties, with respect to most of the
Partnership's assets. Exchange-traded futures, exchange-traded forward, and
exchange-traded futures-styled options contracts are marked to market on a
daily basis, with variations in value settled on a daily basis. MS&Co. and
MSIP, each as a futures commission merchant for the Partnership's
exchange-traded futures, exchange-traded forward, and exchange-traded
futures-styled options contracts, are required, pursuant to regulations of the
Commodity Futures Trading Commission, to segregate from their own assets, and
for the sole benefit of their commodity customers, all funds held by them with
respect to exchange-traded futures, exchange-traded forward, and
exchange-traded futures-styled options contracts, including an amount equal to
the net unrealized gains (losses) on all open exchange-traded futures,
exchange-traded forward, and exchange-traded futures-styled options contracts,
which funds, in the aggregate, totaled $11,641,596 and $14,248,316 at December
31, 2007 and 2006, respectively. With respect to the Partnership's
off-exchange-traded forward currency contracts, there are no daily settlements
of variation in value, nor is there any requirement that an amount equal to the
net unrealized gains (losses) on such contracts be segregated. However, the
Partnership is required to meet margin requirements equal to the net unrealized
loss on open forward currency contracts in the Partnership accounts with the
counterparty, which is accomplished by daily maintenance of the cash balance in
a custody account held at MS&Co. With respect to those off-exchange-traded
forward currency contracts, the Partnership is at risk to the ability of
MS&Co., the sole counterparty on all such contracts, to perform. The
Partnership has a netting agreement with MS&Co. This agreement, which seeks to
reduce both the Partnership's and MS&Co.'s exposure on off-exchange-traded
forward currency contracts, should materially decrease the Partnership's credit
risk in the event of MS&Co.'s bankruptcy or insolvency.

<PAGE>

MORGAN STANLEY PRINCIPAL PLUS FUND L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(concluded)


--------------------------------------------------------------------------------
5. FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
                                    2007        2006       2005
                                 ---------   ---------  ---------
<S>                              <C>         <C>        <C>
PER UNIT OPERATING
 PERFORMANCE:
NET ASSET VALUE,
 JANUARY 1:                      $1,909.85   $1,895.39  $1,970.00
                                 ---------   ---------  ---------
NET OPERATING
 RESULTS:
   Interest Income                   79.28       83.24      53.13
   Expenses                        (126.19)    (116.53)   (112.88)
   Realized Profit (Loss)/(1)/      (13.98)      31.38      10.16
   Unrealized Profit (Loss)          23.01       16.43     (26.71)
   Proceeds from Litigation
    Settlement                       --          --          0.67
                                 ---------   ---------  ---------
   Income (Loss) before
    Minority Interest               (37.88)      14.52     (75.63)
   Less: Minority Interest           (0.45)       0.06      (1.02)
                                 ---------   ---------  ---------
   Net Income (Loss)                (37.43)      14.46     (74.61)
                                 ---------   ---------  ---------
NET ASSET VALUE,
 DECEMBER 31:                    $1,872.42   $1,909.85  $1,895.39
                                 =========   =========  =========
FOR THE CALENDAR
 YEAR:
RATIOS TO AVERAGE NET
 ASSETS:
   Net Investment Loss                (2.5)%    (1.8)%     (3.2)%
   Expenses before Incentive
    Fees                               6.7%      6.2 %      6.0 %
   Expenses after Incentive
    Fees                               6.7%      6.2 %      6.0 %
   Net Income (Loss)                  (1.9)%     0.8 %     (4.3)%
TOTAL RETURN BEFORE
 INCENTIVE FEES                       (2.0)%     0.8 %     (3.8)%
TOTAL RETURN AFTER
 INCENTIVE FEES                       (2.0)%     0.8 %     (3.8)%

INCEPTION-TO-DATE
 RETURN                               87.2%
COMPOUND
 ANNUALIZED RETURN                     3.6%
</TABLE>

(1)Realized Profit (Loss) is a balancing amount necessary to reconcile the
   change in Net Asset Value per Unit with the other per Unit information.

<PAGE>


                    Demeter Management Corporation
                    522 Fifth Avenue, 13th Floor
                    New York, NY 10036

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